Green hotels gain, others spew hot air

Saving the environment can go with lower power bills, but many still reluctant to change

(SINGAPORE) In some parts of the world, conviction is driving hotels to go green. But, as several hotels in Singapore have concluded, common sense points to the same path.

The Far East Organization, for example, realised that its corporate electricity bill for all its properties across Singapore was $33 million a year. ‘Imagine if we can cut that by 10 per cent,’ said Chia Swee Cheng, assistant director of the group’s central engineering & operations department.

And so its Changi Village hotel has new boiler and chiller systems in place and a far more efficient energy use.

Over at the Grand Hyatt, Singapore’s first plant to produce electricity, steam and chilled water at a hotel is under construction. Along with the solar panels planned for a new garden conference room, the plant could slash Hyatt’s energy use by a third and save it $800,000 in bills.

While critics say that many local hotels pay only lip service to eco-programmes, there are others, led by Hyatt, who are changing mindsets, going green – and finding that it pays.

‘My impression is that all the hotel operators are serious about sustainability, but not necessarily all the owners, who have to pay for changes,’ said Robert Hacker of Horwath, a hotel consultancy. ‘Generally, all the international chains are taking on board green principles.’

The Regent Singapore, for example, in late 2005 replaced a diesel boiler for heating water with a heat exchanger that produces hot and cold water at the same time. This has cut energy use by a fifth.

And at the Shangri-La, energy use improved over 10 per cent through better work processes, such as using small ovens to prepare meals on demand, rather than keeping a large oven fired up all day just to reheat food. But critics like Tay Kheng Soon, architect and promoter of socially and environmentally conscious architecture in Singapore since the 1970s, say Hyatt is the only energy-efficient hotel in Singapore.

And though the National Environment Agency handed out the new Energy Smart label to some hotels last month, that is only a starting point, said Mr Tay. A more basic change might come about, in his opinion, if there were incentives to use renewable energy sources, like wind and solar energy.

Many hotels ‘hand-wave’ over cosmetic eco-programmes, like using hybrid cars to ferry guests or planting trees, but miss the ‘elephant in the room’ – like the efficiency of their chiller systems – said Lee Eng Lock, general manager of Trane, a US-based energy solutions firm and an accredited Energy Service Company (ESCO) here.

The Hyatt sets the bar but there is no reason why others should not follow suit, with high returns and backed by bank guarantees, said Mr Lee.

But business in the hotel sector is negotiated on the basis of relationships, so it is not necessarily the most efficient solutions that get selected, he said.

Luxury hotels in Singapore run at an energy intensity of 427 kilowatt hours of electricity per square metre of gross floor area, according to a study by the National University of Singapore (NUS) last year. This is down from the 468 KWh/m2 reported by Apec in 1999, but pales beside the under-300 KWh/m2 averages achieved in parts of Europe and Australia.

In other words, local hotels could be using up to 40 per cent more electricity than ideal.

Dr Lee Siew Eang, head of NUS’s Energy Sustainability Unit and leader of the study, recalls some four and fivestar hotels saying during the study that energy efficiency was ‘not relevant’ to them – since, as ‘posh hotels’, it was ‘their duty to be extravagant’.

Many hotel managers were not aware of how much energy their buildings were using. One hotel, which had wanted to apply for an eco-award, was found by NUS to be using an exceptionally high 800 KWh/m2, said Dr Lee.

That’s almost twice the industry average. According to the Singapore Hotel Association (SHA), which represents about 90 per cent of the total number of gazetted hotel rooms here, most hotels in Singapore pay attention to water and energy conservation. ‘In the long run, it makes good corporate sense for hotels to go green as it not only saves the environment but reduces costs,’ said SHA president Kay Kuok.

Whether the message has sunk home is another matter. With the two integrated resorts set to help up Singapore’s hotel room stock by over 10 per cent by 2010, it is a critical time to move into energy efficiency, said NUS’s Dr Lee. ‘The designs are being drawn right now. If we miss this chance, we have to wait another 20 years.’

 

Source: Business Times 15 Sept 07

Job growth revised upwards as wages rise 8.5% in Q2

Updated figure is 64,400 , an all-time quarterly high, up from 61,900 earlier

(SINGAPORE) The record number of jobs created in the April-June quarter has been revised upward as employment kept surging, pushing monthly earnings to a level not seen since the last economic boom in 2000.

Updated figures released yesterday by the Ministry of Manpower (MOM) in its quarterly Labour Market report show the economy added 64,400 jobs in Q2 – an all-time quarterly high, exceeding the increase of 49,400 in the previous quarter and 36,400 in Q2 last year.

Earlier preliminary data showed total employment jumped 61,900 in Q2.

Accordingly, the unemployment rate in June has been adjusted from a preliminary 2.4 per cent – a six-year low – to 2.3 per cent, down from 2.9 per cent in March.

The resident jobless rate – covering Singaporeans and permanent residents – was similarly revised from 3.2 to 3.1 per cent, down from 4 per cent in March.

The tighter labour market has put even more pressures on wages, raising monthly earnings 8.5 per cent over the year in Q2, up from 5.5 per cent in Q1. After adjusting for inflation, real earnings in Q2 rose 7.5 per cent, against 5 per cent in Q1.

‘The increase was the highest registered since the last economic boom in 2000 when earnings rose by 8.9 per cent in nominal and 7.5 per cent in real terms,’ MOM’s report says.

Productivity also increased, though marginally by 0.4 per cent. But the rise ended two straight quarters of decline.

‘The improvement in productivity helped moderate the increase in overall unit labour cost (ULC) to 5.7 per cent over the year in Q2 07, after a 5.9 per cent increase in the previous quarter,’ the report says.

In the manufacturing sector, ULC grew 3.1 per cent, sharply down from 7.1 per cent in Q1.

The services sector led the hike in earnings in Q2, posting a real increase of 8.6 per cent. Real earnings in manufacturing and construction actually eased in Q2.

The new jobs in Q2 brought total employment growth to 113,800 in the first six months of the year, against 81,500 in the same period in 2006.

The services sector, led by gains in community, social and personal services, continued to account for the biggest chunk of the employment growth in Q2. It added 36,800 jobs, up from 33,700 in Q1.

Construction, fuelled by a building boom, posted the biggest jump in employment, doubling the jobs created to 10,900 compared with the previous quarter.

‘Brisk hirings in marine and offshore engineering more than offset job losses in electronics, leading to growth in manufacturing employment of 15,900,’ MOM’s report says. In Q1, manufacturing created 10,100 new jobs.

But the improvement on the retrenchment front was less stark in Q2 – 1,918 workers were axed, marginally below the 1,964 laid off in Q1. Over the first six months, the improvement was more significant, with the number down to 3,882, from 6,916 in the first half of 2006.

Job-hopping in Q2 was not as rampant as feared, despite the labour pool drying up, according to the report.

The resignation rate among professionals, managers and executives rose. But the increase was small – up from 1.6 per cent in Q2 last year to 1.7 per cent. Among production operators, cleaners and labourers, it remained the same as a year ago.

 

Source: Business Times 15 Sept 07

I was late to see sub-prime storm brewing: Greenspan

(WASHINGTON) Former US Federal Reserve chairman Alan Greenspan said he was late to see the storm gathering around US mortgage lending practices and commended his successor Ben Bernanke’s handling of the crisis, saying he would likely be responding in a similar fashion. ‘I think he is doing an excellent job,’ Mr Greenspan said of Mr Bernanke in a television interview scheduled to air tomorrow.

Mr Greenspan was asked if he would lower interest rates as dramatically and quickly now as he did just ahead of, during and in the wake of the 2001 recession, according to excerpts of the CBS 60 Minutes interview released on Thursday.

‘I’m not sure that’s true,’ he said. ‘We were dealing with an environment back then when inflation was easing. We could have acted without the fear of stoking inflationary pressures. You can’t do that anymore . . . I’m not sure I would have done anything different (if chairman today).’

The comments from Mr Greenspan, who was tested early in his tenure by the October 1987 stock market crash, come as Mr Bernanke’s skills are challenged by rising defaults in the US sub-prime mortgage market, which caters to risky borrowers, and a related global credit squeeze.

Mr Bernanke’s Fed has come under fire from some quarters for not acknowledging quickly enough how deeply the current crisis could harm the economy or responding aggressively enough to keep the US expansion on track. Some analysts have speculated that Mr Greenspan would have acted more swiftly.

Mr Bernanke and his colleagues will meet on Sept 18. They are widely expected to lower benchmark overnight interest rates, which the Fed has held at 5.25 per cent since June 2006, by at least a quarterpercentage point.

Mr Bernanke had justified holding rates at that level despite some clamouring in markets for lower borrowing costs, on the grounds that inflation has remained troublingly high and needed to recede first.

Only in recent weeks, as credit stress mounted in financial markets and it became clear a housing recovery was a long ways off, have Fed officials suggested that worries about growth have supplanted longstanding concerns on inflation. The Greenspan interview – on the No. 1 US news programme with an average 13.2 million viewers – is the first in a series of public appearances the former Fed chairman is making to publicise his memoir, The Age of Turbulence, which is being released on Monday.

Mr Greenspan, who stepped down from the helm of the US central bank in January 2006, said that as Fed chief he knew about questionable lending practices that were leaving sub-prime borrowers with adjustable rate loans vulnerable to harm from rising interest rates, but did not recognise those loans would trigger broader problems until fairly recently, CBS said. ‘While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,’ Mr Greenspan said. ‘I really didn’t get it until very late in 2005 and 2006.’

Mr Greenspan, 81, has received credit for leading the economy to its longest-ever expansion in the 1990s and many economists have praised his handling of a sequence of crises.

Indeed, some have hailed him as the greatest central banker in US history. However, others criticise him for sowing the seeds of successive asset bubbles, first in US stock markets and later in housing.

He has also come under fire for suggesting during his Fed tenure that adjustable rate mortgages could be a cost-saving financing option for many borrowers, just shortly before the Fed embarked on a long push to move rates higher.

In the interview, Mr Greenspan defended the Fed’s decision under his leadership to hold interest rates at or near lows not seen in four decades between December 2001 and June 2004, a period in which the economy was enjoying only a lacklustre recovery from recession. The interview is scheduled for broadcast at 2300 GMT tomorrow.

 

Source: Reuters (Business Times 15 Sept 07)

US consumer spending, global growth may cushion slowdown

Consumption one reason for mild instead of serious downturn: analysts

(NEW YORK) When Annie Cox is unsure if the economy is headed south – a question on the minds of many on Wall Street and Main Street these days – she keeps an eye on the orders for beverages at the diner she runs in Oklahoma City.

In recent weeks, Ms Cox said that she has seen a slight drop off, leading her to believe business could slow in the coming months. ‘When they start ordering water instead of tea or Pepsi, that means they’re cutting back,’ said Ms Cox, who runs the 1950s-style restaurant, Sherri’s Diner, which is named after her mother.

Leon Tuberman, the chief executive of the Barn Furniture Mart in Southern California, is similarly wary. Despite widespread troubles in the housing market, business is down only about 5 per cent. But Mr Tuberman said that he is not replacing the five employees who have left the store voluntarily in the last six months, because he suspects spending will remain sluggish.

Across the nation, the impact of the turmoil in the housing and credit markets on the broader economy has been relatively modest so far. But just as some of Ms Cox’s customers are becoming more cautious and Mr Tuberman is holding back on hiring, many people are preparing to hit some economic headwinds.

Whether that caution on the part of consumers and business translates into little more than a modest economic slowdown or turns into a full blown recession will depend on a variety of factors. But perhaps the most important is whether jobs remain plentiful and consumers keep spending.

That is what was so ominous about the government’s report last week that businesses reduced total employment by 4,000 jobs in August and that payroll gains for previous months were being lowered. Another important labour market indicator – the share of the working-age population that reports holding a job – has fallen to its lowest level in nearly two years. And consumer spending, while it continues to grow, has slowed in recent months.

‘Large numbers of people are leaving the job market,’ said Jan Hatzius, chief US economist at Goldman Sachs.

‘That is not just a sudden bout of laziness, but it’s a response to reduced labour market activity.’

Mr Hatzius and his peers on Wall Street now put the risk of a recession at about one third, which is significantly higher than earlier this year but far from a sure thing.

They note that in recent years consumer spending was led higher by the torrid boom in housing, especially in big states like California, Florida, Arizona and New York. Now, as home prices fall, loans are harder to get and home equity borrowing is tapering off. As a result, consumer spending is likely to suffer.

Those downward pressures, though, are being offset by a robust global economy that is providing a significant boost to exports, corporate profits and real wages, which finally picked up in the last year after stagnating for much of the decade. Optimists note that consumer spending is unlikely to slow down as long as hourly wages are perking along at a nominal annual pace of about 4 per cent, about 1.5 per cent above the inflation rate.

‘There clearly is a problem in mortgages,’ said David Kelley, an economist at Putnam Investments, the mutual fund company in Boston.

But ‘outside the mortgage market, we don’t really see the consumer stopping spending’. Consumer spending has often defied dour predictions. There was no decline in spending during the recession of 2001, even as job losses mounted and business sentiment sank after the technology bubble burst.

That’s one reason the downturn was so mild compared with the harsher recessions of the early 1980s and early 1990s.

 

Source: NYT (Business Times 15 Sept 07)

PLAY OF THE WEEK – CDL attracts heavy buying after clinching iconic site

CLINCHING the historic Beach Road military camp site helped ignite fresh buying interest in property giant City Developments (CDL).

The site, which cost the CDL-led consortium $1.69 billion, is just a stone’s throw from the upcoming Marina Bay Sands integrated resort and the Formula One street circuit.

Observers believe the acquisition will enhance CDL’s already high-quality portfolio, which includes top-notch commercial buildings and condos like Republic Plaza and The Sail@Marina Bay.

CDL yesterday surged 50 cents to $15.40 on a heavy volume of 5.8 million shares. It hit an intra-day high of $15.60. Its total gain for the week was 40 cents.

Kim Eng Research analyst Wilson Liew said the iconic Beach Road site is slated to include premium offices, two luxury hotels, exclusive residences and retail space with a total gross floor area of 1.58 million sq ft.

‘Assuming a breakdown of 40 per cent for office use, 30 per cent for hotel use, 15 per cent for residential use and 15 per cent for retail use, we estimate the total development cost at around $2.6 billion, should add 25 cents per share to revalued net asset value (RNAV),’ he said.

Mr Liew raised his target price for CDL to $18, based on a 20 per cent premium to his RNAV of $15.66.

The heavy buying of CDL shares also reflected investors’ conviction that demand would stay buoyant in the red-hot residential market.

On Thursday, BNP Paribas noted that developers had maintained their selling prices ‘and have no intention of lowering them at this juncture’.

This was despite a slowdown in property sales last month, which could have been due to buyers here also taking a ‘wait-and-see’ attitude, as the United States mortgage crisis deepened.

On the secondary resale market, the wide disparity between sellers’ asking prices and buyers’ offer prices is narrowing, suggesting that demand in the property market is sustainable.

‘Singapore developers are currently trading at around 6 per cent to 37 per cent below the peak share price prior to the market correction in late July, which presents an attractive discount, especially as property market fundamentals have not changed much over the period.’

BNP Paribas also expects developers with a big exposure to the Singapore mass market, such as CDL, to benefit from opportunities for collective sales still available on the city’s fringes and in suburban areas where land is still affordable.

 

Source: The Straits Times 15 Sept 07

Wages rising faster than at any time since 2000

Productivity also up, but experts fear high labour costs could dent competitiveness

LABOUR-SHORT bosses are raising wages faster than at any time since 2000, but the good times for workers could dent Singapore’s competitiveness.

Workers’ earnings have recorded a year-on-year increase of 8.5 per cent, the largest rise since the economic boom seven years ago.

Labour experts are worried that the higher labour costs could put a dampener on the economy.

But one positive from the current boom is that, overall, workers also appear to be slightly more productive than before.

Fresh figures released yesterday by the Manpower Ministry covering the April to June period showed the 8.5 per cent increase was an improvement from the 5.5 per cent growth in the first three months of this year.

At the peak of the 2000 economic boom, wages rose 8.9 per cent.

Labour economist Cheolsung Park said this rise in wages was to be expected during the sustained strong economic growth. ‘The market seems to have very little room to supply more labour because the demand has been so high and workers have had little trouble in finding jobs.’

Singapore National Employers Federation (SNEF) executive director Koh Juan Kiat reckons employers could be hiring in anticipation of better business or greater staff turnover. ‘This could slow down when they have full strength,’ he said.

The Manpower Ministry report illustrated just how tight the labour market has become.

The construction, marine and offshore engineering sectors helped pump a record 64,400 new jobs into the pool from April to June. This added to the increase of 49,400 in the previous quarter.

Unemployment also fell. The overall rate was 2.3 per cent in June, down from 2.9 per cent in March. Fewer people were also laid off, and of those who were, more had found jobs within six months.

Also up: the number of job vacancies, at 37,400 in June this year. This is a 16 per cent rise from the previous quarter.

The increase in wages was matched with labour productivity rising by 0.4 per cent in the second quarter of this year, from the same period in the preceding year. The construction sector powered ahead with a 6.4 per cent increase, a reflection of the growth in building activity.

The improvements in productivity across the board helped moderate the rise in the overall unit labour cost – a measure of wages, levies and other labour costs against output – to 5.7 per cent in the second quarter.

Professor Park noted that rising labour costs may slow down the economy in the long run. But he expects more foreign workers to be hired, and immigration policies used to ’stem excessive increase in labour costs’.

SNEF’s Mr Koh believes employers should rely not only on wage increases to attract and retain talent, but also on offers of good career paths, flexible work arrangements and training and development opportunities.

Added National Trades Union Congress assistant secretary-general Halimah Yacob: ‘They should also make better use of the available pool of older workers and the women, particularly housewives who are seeking to re-enter the labour market.’

Jobs created

• Jan-June 2007: 113,800

• Jan-June 2006: 81,500

Unemployment rate

• June 2007: 2.3 per cent

• l March 2007: 2.9 per cent

Job vacancies

• June 2007: 37,400

• March 2007: 32,200

Wage increase (year-on-year)

• April-June 2007: 8.5 per cent

• Jan-March 2007: 5.5 per cent

Labour productivity (year-on-year)

• April-June 2007: 0.4 per cent

• Jan-March 2007: -1.3 per cent

Source: The Straits Times 15 Sept 07

Is red-hot property market starting to slow down?

Possible correction seen but underlying demand is still strong, say experts

AFTER months of racing along at a feverish pace, Singapore’s residential property market seems to be finally taking a breather.

Home sales and collective sales slowed last month, and property watchers have started to speak of a possible correction in the market.

‘A correction is going to take place. The question is: How severe?’ OCBC Investment Research analyst Winston Liew told Reuters.

Experts agree, however, that underlying housing demand is still strong, and that home prices will keep rising, although at a slower pace. Prices surged 13.5 per cent in the first six months of the year alone.

‘Property market fundamentals have not changed much over the period,’ said French bank BNP Paribas in a report on Thursday.

It is tipping mid-tier and suburban homes as the big growth areas for the rest of the year. These have lagged in the rebound, which has been led mainly by high-end homes setting new record prices.

‘We still see opportunities available on the fringe of the city and suburban areas, where land remains affordable to developers,’ BNP said.

It noted, however, that home sales had been falling since June, according to caveats lodged. Sales fell from 4,921 in May to 3,917 in June to 3,540 in July.

So far, just 1,127 sales have been lodged for last month, partly due to a time lag in caveats. BNP estimates, however, that even when all the data is in, last month’s sales will hit about 2,500 only.

Collective sales, which set a string of record land prices earlier this year, have also slowed to a trickle, with only one deal recorded last month.

Property analysts have offered several reasons for the current slowdown.

One is the sub-prime home loans crisis in the United States, which triggered weeks of stock market volatility in Singapore and in the rest of the region. Developers say this has led to more caution among foreign investors, some of whom are the biggest buyers of luxury homes in Singapore.

Consultants have also blamed the sharp run-up in property prices since the beginning of the year. With asking prices breaching the stratosphere, many buyers are now holding out for better deals.

Upcoming changes in rules on collective sales and higher development charges are also dampening the collective-sale market, previously a major source of housing supply and demand.

A fourth reason could be the month-long hungry ghost festival that ended last week. Fewer projects were launched during this time compared to previous months.

But projects that did go on sale last month. including The Parc in West Coast Walk and Soleil@Sinaran in Novena, received a strong response.

MCL Land has also quietly sold more than half its strata titled terrace homes in Bukit Timah since Monday, even before official previews. About a third of the 168 units at Hillcrest Villas have been taken up by the developer’s close associates at between $2.5 million and $3 million apiece.

‘Residential demand remains healthy, even though homebuyers and investors will tread cautiously,’ CB Richard Ellis executive director Li Hiaw Ho said.

He and other market experts agree that while market activity has slowed somewhat, the pace of growth will pick up again at year-end.

‘The stock market has started to stabilise and, come November, things will probably go back to the way they were before August,’ said Mr Lui Seng Fatt, regional director at Jones Lang LaSalle.

 

Source: The Straits Times 15 Sept 07

No signs of bubble in property sector, say two bankers

SINGAPORE’S buoyant property market shows no signs of a speculative bubble, two leading bankers said yesterday.

DBS Group Holdings chief executive Jackson Tai said home prices may have risen but this simply reflects the strong fundamentals of a balanced economy.

Mr Philip Lee, senior country officer of investment bank JPMorgan Chase, echoed Mr Tai’s views.

‘There’s no bubble in Singapore…while luxury prices have soared recently, mass-market prices have not gone up yet.’

They were among five corporate bigwigs from the thriving finance and property sectors who discussed Singapore’s booming economy at an annual Leadership Forum organised by newswire Bloomberg.

Four other speakers from sectors such as consulting and asset management spoke about the global risks at the 90-minute session held at the Ritz-Carlton Milennia Hotel.

Singapore does not face the same problems as the United States, where the US Federal Reserve has created ‘a housing bubble, inducing people to refinance their homes’ with ’spicy loans’ and ‘artificially low rates’, said Mr Tai.

In contrast, 90 per cent of people own their own homes in Singapore, so ‘the culture here of protecting one’s home is very different from that in the US,’ he noted.

While acknowledging that ’speculation is always in the marketplace’, Mr Tai said Singapore is ‘not a one-trick pony’ but has a well-diversified economy.

Property prices and broader economic growth will be sustained by a ‘rising population’ and more diversified economy, added Mr Chris Fossick, South-east Asia managing director at Jones Lang LaSalle, pointed to a ‘rising population’.

Singapore will enjoy new booster engines to its growth with the upcoming integrated resorts which will boost tourism and attract more high-networth clients, said Mr Kenneth Sit, chief executive of Bank Sarasin-Rabo (Asia).

Even in the event of a downturn in Asia or globally, Singapore may benefit from a ‘capital flight to quality’ because it is a reputable Asian financial hub, noted Mr Lim Cheng Teck, chief executive of Standard Chartered Singapore.

 

Source: The Straits Times 15 Sept 07

China’s tallest tower caps Shanghai skyline

Final beam is laid for the skyscraper to be completed by 2008 Olympics

SHANGHAI – AFTER more than a decade of delays, China’s tallest building is slicing through Shanghai’s hazy, skyscraper-studded skyline – a new trophy built by Japanese property tycoon Minoru Mori.

The 101-storey Shanghai World Financial Centre, a 492m wedge-shaped tower with a rectangular hole at the very top, was topped out yesterday as its last beam was laid amid a drizzle which obscured the building’s panoramic view of the winding Huangpu River and endless highrises.

With China’s economy growing nearly 12 per cent a year and stock and real estate prices soaring, ‘the timing is just about the best it could be’, Mr Mori said on Thursday.

‘When I saw the building this morning, at its full height, I thought it’s really beautiful. I think we’ve really succeeded,’ he told reporters at Shanghai’s Jinmao Tower, a silver spire next door to the World Financial Centre that, at 421m, was China’s tallest building until now.

Mr Mori’s visions of a ‘vertical garden city’ have transformed the landscape of his hometown Tokyo with mammoth, mixed-use redevelopment projects such as Roppongi Hills, Ark Hills and Atago Green Hills.

The 115 billion yen (S$1.5 billion) Shanghai project by the developer’s flagship Mori Building Co, which is due for completion in time for the 2008 Beijing Olympics, is also evidence that despite the political tensions that flare up between China and Japan at regular intervals, business is business.

The developer acquired the land for the huge project, in the city’s Lujiazui financial district, in 1994. Piling work began in 1997, and then halted for six years after the Asian financial crisis wiped out demand for new office space.

By the time the project was revived in 2003, he had proposed and won approval from the Shanghai authorities to expand its size to make it the world’s tallest – a symbol of China’s growing affluence and economic might.

The tower, buttressed by a conference centre and shopping mall, will eventually house 70 floors of office space meant to accommodate 12,000 people, with a hotel, restaurants and an observatory at the top.

However, Taiwan’s Taipei 101, at 508m beat the building’s height, taking the tallest sweepstakes in 2004.

Developers of a skyscraper in oil-rich Dubai recently declared theirs the world’s tallest building when construction reached 512m – and the building is still far from completion.

After the Sept 11, 2001, terrorist attacks in the United States, the building was redesigned into a so-called ‘megastructure’ with four huge pillars to make it stronger, Mr Mori said.

Later, the builders altered another key design feature – a circular cutout near the top – after complaints that it resembled the rising sun on Japan’s flag, a symbol reviled by many Chinese because of Japan’s brutal occupation of the country during World War II.

Mr Mori obliged, changing it to a rectangle.

‘For us it wasn’t such a big deal to change it and it pleased the Shanghai authorities,’ he said.

Given strong interest from many international financial firms, Mori Building expects occupancy in the new building to be at 90 per cent by the end of next year, said Mr Hiroo Mori, the senior Mori’s son-in-law and a managing director of the company.

He said plans call for rents of more than US$3 (S$4.5) per square metre per day – possibly the highest ever for the city.

Higher than forecast profitability means that the company expects to recoup its investment within 15 years.

 

Source: ASSOCIATED PRESS (The Straits Times 15 Sept 07)

Gardens and sea to frame new Marina South homes

60 hectares set aside for 11,000 units in latest makeover move

(SINGAPORE) A landmark residential district – with lush gardens by its side, a spectacular view of the sea and the Sands Integrated Resort a mere stone’s throw away – will rise over the next few years to add further gloss to the Marina Bay area.

Some 60 hectares of land, on which 11,000 homes will be built, has been set aside for the project. The Marina South Residential District (MSRD) will also have 1.6 million sq ft set aside for hotel use, another 678,000 sq ft of commercial space and even a primary and a secondary school. There will also be community facilities for all to enjoy, the government announced yesterday.

The entire project will be developed over a 15 to 20-year period once the supporting infrastructure has been put in place, said the Urban Redevelopment Authority (URA).

URA also said given the size of the area, it is likely that the land parcels will be released in phases.

The government agency is master planning the project as the next stage of development for the Marina Bay area.

Marina Bay, which is touted as the centrepiece of Singapore’s urban transformation into a vibrant, global city, is already home to several upcoming prime projects – including the Marina Bay Sands Integrated Resort and the 100-ha Gardens By the Bay.

This residential site is located between the upcoming Garden at Marina South and the Straits of Singapore. URA hopes that MSRD will offer its residents the best of both worlds – a rare opportunity to experience waterfront living together with the lush greenery provided by the garden.

‘Obviously, it is a choice location – right between the garden and the sea,’ said Knight Frank managing director Tan Tiong Cheng. ‘The view will be even better than that from the Marina Bay integrated resort.’

Said Colliers International’s director for research and consultancy Tay Huey Ying: ‘The area will provide a very wholesome residential environment.’

The bid to develop MSRD is in line with the government’s 2001 Concept Plan – a long term plan that guides Singapore’s development over the next 40 to 50 years – which called for more city living options for Singaporeans.

Then, URA said that those who like the downtown buzz can look forward to having 90,000 more units to choose from, mostly in the New Downtown at Marina South.

Experts expect that homes in MSRD will be popular, especially with foreigners.

‘It is possible that the primary and secondary schools could be foreign schools,’ said Colin Tan, Chesterton International’s head of research and consultancy.

However, market watchers mostly said that even when boosted by this latest news, home prices in the Marina Bay area are not likely to reach those fetched by luxury projects in the Orchard Road vicinity anytime soon.

‘I don’t think the development will overtake Orchard Road in terms of prices and appeal to foreigners,’ said Ms Tay. Facilities catering to foreign residents, such as foreign schools and embassies, are now located in the Orchard Road vicinity, she said.

Knight Frank’s Mr Tan agreed: ‘At the end of the day, Marina South is a new district; it is not tested.’

In addition, concerns exist about the infrastructure in the area. For one, the road network in the Marina Bay area will have to be improved, analysts said.

Right now, URA is looking to garner new and innovative ideas to distinguish MSRD.

Together with the Singapore Institute of Architects, it is organising a competition, which will close on November 12, for design ideas for the district. A sum of $50,000 has been set aside to be awarded for up to 10 best ideas.

 

 

Source: Business Times 14 Sept 07

Horizon sellers miss deadline; hearing expected in 2 weeks

Majority sellers still trying to form sales committee; some keen to contest suit

THE majority sellers of Horizon Towers missed a deadline to extend the completion date for the collective sale of the development.

And the buyers are now set to make good on their threat to haul each and every one of the sellers to court and sue them for millions of dollars.

The buyers of the Leonie Hill property – Hotel Properties Ltd (HPL), Morgan Stanley Real Estate-managed funds and Qatar Investment Authority – had given the majority sellers until Tuesday this week, Sept 11, to meet their demands for an extension of the completion date.

The deadline was set after repeated requests earlier for an extension were ignored. BT understands the sellers did not respond to the latest deadline or extend the completion date.

It is understood that a High Court hearing is set for Sept 27. At the hearing, the buyers will ask the court to declare the majority sellers in breach of a collective sale agreement signed by both sides in February.

They will also ask the court to award them damages of between $800 million and $1 billion, as well as interest and costs.

This means the 270 owners – of 173 units – who signed off on the en bloc sale are now personally liable for $3.7 million each, or $5.78 million per unit. It is believed that the enormity of the personal liability has splintered the sellers as a group. Some owners have indicated they want to extend the deadline, while others are keen to contest the lawsuit.

This has driven several owners to seek their own legal representation – apart from group representation in the form of law firm Tan Rajah & Cheah.

The Horizon Towers sales committee disintegrated last week. The last three members resigned on Friday, after four other members quit in the days before.

The majority sellers are now scrambling to assemble a new sales committee so there will be some sort of representation for the entire group, to manage the en bloc saga going forward.

The en bloc sale collapsed in August after the Strata Titles Board (STB) refused to grant a collective sale order on the grounds that Horizon Towers filed a defective application.

STB’s decision, just days before the sale completion deadline, meant there was no time to file a fresh en bloc application.

The buyers wanted the majority sellers to extend the sale completion deadline by four months, appeal against STB’s decision and file a fresh application if needed.

The sellers have appealed against STB’s decision but have not extended the deadline. Nor have they indicated whether they intend to file a fresh application with STB.

It has been reported that the majority sellers regretted their decision to sell Horizon Towers for $500 million to HPL and its partners after neighbouring developments began fetching much higher prices in the months that followed.

HPL and its partners allege that the sellers have not done everything in their power to file a proper application to STB – a condition of the sale agreement – and are suing them on this basis.

 

Source: Business Times 14 Sept 07

HDB upgraders are back in force

Big hike in secondary market deals shows genuine demand: analysts

(SINGAPORE) The broad-based recovery in the property sector is gathering pace with data showing a spike in the number of property transactions by Housing and Development Board (HDB) upgraders.

Looking at data which captures transactions made by buyers with registered HDB addresses – traditionally considered HDB upgraders – Citigroup noted that, in Q2 2007, HDB upgraders made about 1,750 transactions in the secondary market, an increase of 75 per cent from the previous quarter when around 1,000 transactions were recorded.

On the significance of secondary market transactions, Citigroup analyst Wendy Koh said that these represented ‘genuine demand as full payment is required for completed developments’.

Although there is always some level of speculation in a rising market, the mass market appears to be safe for now, with Citigroup noting that subsales in the mass market segment stood at about 9 per cent of total sales compared to 27 per cent at the peak of 1995/1996.

DTZ Debenham Tie Leung executive director Ong Choon Fah also believes buyers in this segment are genuine.

‘Most speculation still takes place in the prime districts because price increases (in the mass market) are still not as significant,’ she said

Mrs Ong added that the recovery of prices for the HDB resale segment has also boosted the number of upgraders and noted that about 70 per cent of resale flats transacted at above valuation in Q2.

DTZ’s figures show that combined primary and secondary market transactions by upgraders increased by about 50 per cent in Q2 over the previous quarter. Popular new developments among upgraders were The Quartz near Buangkok MRT Station, Northwood in Sembawang and Ferraria Park Condo in Pasir Ris. Upgraders made up 80 per cent, 58 per cent and 54 per cent of the buyers respectively.

‘There is also now more urgency to buy because there is the belief that prices seen in the prime areas will filter out into the suburban districts,’ she added.

Upgraders have also bought into more upscale developments.

A spokesman for UOL said that they formed about 16 per cent of the buyers for Pavilion 11 at Minbu Road while Frasers Centrepoint said a similar 16 per cent have bought into The Soleil at Novena. Even at the more expensive The Seafront on Meyer, CapitaLand said that just under 5 per cent are buyers with HDB addresses.

HDB upgraders are still, however, price sensitive and Mrs Ong attributed the spike in secondary market transactions to this as the secondary market offers lower-cost private residential alternatives.

Speculation could, of course, raise prices. A recent report by Credit Bureau (Singapore) revealed that people living in the heartlands of Serangoon Gardens, Hougang and Punggol recorded the highest number of borrowers with multiple property loans, suggesting that they owned homes for reasons other than to live in.

Savills Singapore director (marketing and business development) Ku Swee Yong, who also believes speculation has yet to hit the mass market, reckoned that the increase in the number of borrowers with multiple loans could be due to the fact that several developments in the area, including Kovan Melody and Tangerine Grove, have obtained temporary occupation permits (TOP), requiring existing homeowners who opted for deferred payment schemes to apply for loans.

He also noted that some collective sale beneficiaries have had to apply for housing loans because more banks are refusing to give bridging loans.

CB Richard Ellis executive director Li Hiaw Ho does believe that speculation is increasing in new suburban projects like One Rochester and Sky@Eleven. Although Mr Li said that it is still ‘quite minimal’, he believed that it will impact overall prices, and that mass market projects will not be spared. ‘You just have to look at the recent land sales price at Ang Mo Kio,’ he added. The site in question sold for about $600 per square foot per plot ratio and is expected to sell for over $1,000 psf.

Source: Business Times 14 Sept 07

Singapore to be Lippo’s springboard to Asia

Group in expansion mode to make Republic its international HQ

(SINGAPORE) The Lippo Group will use Singapore as its international headquarters as it grows its presence in Asia, chief executive James Riady told BT in an interview.

Right now, about 70 per cent of the group’s assets are in Indonesia, but the figure could fall to around 50 per cent in a few years’ time as the group expands in the rest of Asia, Mr Riady said. Mr Riady was in Singapore on Wednesday to receive an honorary Doctor of Letters degree from Australia-based La Trobe University, which held one of its graduation ceremonies here.

‘I think our perspective is now more Asian, and Singapore provides a good base for us to open up in markets across Asia,’ he said.

He identified China as a big market for the group going forward. In South-east Asia, Lippo is looking at Malaysia, Thailand and Vietnam, he said.

But going forward, the bulk of Lippo’s economic base will continue to be in Indonesia, Mr Riady said. Right now, the group has about 70 per cent of its assets in Indonesia, while Singapore accounts for another 15 per cent.

In Singapore, Lippo will continue to grow its property, retail and food businesses, he said. Lippo bought a stake in historic Singapore retailer Robinson last year and also has a majority stake in Auric Pacific, a Singapore-listed food and property company.

Opportunities for property investments are going to be harder to come by in future compared to the past few years, said Mr Riady.

‘I suspect that while the opportunities will still come up, they will not be as many, as the supply (of sites) will not be as much as during the last three years,’ he said.

Lippo will therefore not ‘expand for the sake of expanding’, instead, it will ‘intensify’ what businesses it already has here. For one, the company will look to build up its brand name in Singapore, he added.

Mr Riady received his honorary degree from La Trobe for his accomplishments as a global business leader and education advocate. As chairman of the Pelita Harapan Educational Foundation in Indonesia, Mr Riady has helped set up 18 schools and three universities in Indonesia.

Also, the foundation set up a teacher training college to produce qualified teachers four years ago. And every year, it gives out 500 full scholarships to teachers for the college. The first batch of 500 teachers will graduate in May next year.

As the ‘education centre’ of South-east Asia, it is Singapore’s duty to raise awareness of the importance of education, Mr Riady said.

At Wednesday’s ceremony, close to 100 La Trobe students graduated. Present at the event were Temasek Holdings executive director Ho Ching, who was the guest-of-honour, the university’s vice-chancellor Paul Johnson and Murli Thadani, director of La Trobe’s international arm.

 

Source: Business Times 14 Sept 07

Marina South: New choice area for homes

60ha site earmarked for ‘waterfront-garden living’; design contest seeks fresh ideas

THE Government yesterday earmarked a giant 60ha site right on the coast at Marina South for what it bills as ‘waterfront-garden living’ in the heart of the city.

The site, not far from the upcoming Marina Bay Sands integrated resort, is already being touted as Singapore’s future No.1 residential hot spot by property analysts.

The Marina South Residential District has spectacular sea views in one direction and lush greenery in the other, as it is right next to the upcoming Garden at Marina South.

Up to 11,000 homes are expected to be built in the district, which will also boast shopping malls, hotels, parks and schools.

The site will have roughly the same number of units as District 11, which covers Newton, Novena and Thomson.

To garner fresh, innovative ideas as inspiration for its development, the Urban Redevelopment Authority (URA) and the Singapore Institute of Architects yesterday launched a design competition for the site.

This is a first in the planning for residential districts, said URA yesterday. The competition calls on budding student and professional architects alike – local and foreign – to design a mini-city based on the experience of living in a waterfront garden.

It must also be distinctive, eco-friendly, and promote a strong sense of community.

The institute’s president Tai Lee Siang, one of the judges, told The Straits Times that ‘now is the perfect time to explore…ideas that have never been seen or tested here before’.

Yesterday’s announcement also marks a new chapter for Marina South.

The site is now home to SuperBowl Marina South and Victor’s Superbowl, along with seafood restaurants and wide open spaces.

These buildings will eventually have to make way for the new residential district.

Guidelines from the competition brief, available on the institute’s website www.sia.org.sg gives the project’s gross floor area as 1.5 million sq m and a gross plot ratio of five.

This sets the scene for high-rise, high-density housing, typical of the 50-storey public housing at the Pinnacle@Duxton and the 70-storey apartments at The Sail@Marina Bay, said property analysts.

It will cater to Singaporeans’ growing appetite for high-rise apartments with stunning views. Property analysts anticipate that demand for the site will be red-hot, if the economy remains robust.

‘This has all the makings to be Singapore’s number one residential hot spot,’ said Colliers International’s director for research and consultancy Tay Huey Ying.

When asked if any public housing will be built in the district, URA said detailed plans have not been finalised – but property consultants said this was very unlikely.

URA added that the project’s implementation will be decided when plans are finalised. It expects the district to be developed over a 15- to 20-year period.

The closing date for the competition is Nov 12. Up to 10 of the best ideas will be selected to share a cash prize of $50,000. The winning entries will be announced during the Singapore Design Festival 2007 in November.

Marina Bay Developments  

 

Source: The Straits Times 14 Sept 07

District 19 – home of property investors

Data shows area has highest number with multiple home loans

(SINGAPORE) It may not top Singapore’s wealth charts, but Hougang has plenty of property investors – or speculators. District 19, which includes Serangoon Gardens, Hougang and Punggol, has the highest number of borrowers with multiple property loans, at 3,263.

According to data from Credit Bureau Singapore (CBS), which analysed loans and looked at where borrowers live, investors are defined as people with two home loans and more. They live all over Singapore and are not confined to the rich districts of 10 and 11 or 15.

In fact District 9, which includes Orchard, Cairnhill and River Valley, has only 716 borrowers with at least two home loans. This is much lower than districts 16, 18, 20, 22 and 23, each of which has between 2,000 and 2,700 borrowers with more than one loan.

People with multiple home loans totalled 38,520 in June – a 64 per cent jump from 12 months earlier.

And District 19 took the top prize in this category – at 3,263. CBS general manager Mark Rowley said this could be due to the number of property launches in the area, although the data would include residents who have bought elsewhere.

While the rich residents of districts 15, 9 and 10, which include Katong, Orchard, Ardmore, Bukit Timah and Holland Road, figure prominently in terms of people owing banks more than $1 million on property loans, the data shows people who owe more than a million dollars on homes live all over the island. The number jumped a hefty 26 per cent to 12,884 in June from a year ago.

‘The value of properties has gone up,’ said Mr Rowley who does not consider the jump in big loans a matter of concern, given the low rate of delinquency among borrowers.

District 10, which is made up of Ardmore, Bukit Timah, Holland Road and Tanglin, has the most million-dollar borrowers at 2,033, up 30 per cent from a year ago.

Again District 19 didn’t do too badly. It has 618 such borrowers, a slight gain of 2 per cent from June 2006.

District 24, which comprises Lim Chu Kang and Tengah, has a grand total of 6 people who owe more than $1 million on their home loans, a 100 per cent jump from 12 months ago.

Interestingly, Kranji and Woodgrove in District 25 are the only places where residents who owe more than $1 million showed a drop – 117 versus 119 a year ago. They also seem the most conservative area, with only 20 people having multiple home loans.

And District 25 had a 16 per cent fall in new property loans. This translated to 1,666 people getting a loan, down from 1,984 a year ago.

It was one of five districts that showed a negative in new property loan approvals. The other four were districts 22, 24, 27 and 20.

CBS gets its property loan data from 10 financial institutions, eight banks and two finance companies.

They are ABN Amro Bank, CitiBank, DBS Bank, HSBC, Maybank, OCBC, Standard Chartered Bank, United Overseas Bank, Hong Leong Finance and Sing Investments & Finance.

 

Source: Business Times 13 Sept 07

New rule may result in lumpy property earnings

Proposed change requires developers to book revenue only on completion

(SINGAPORE) A new accounting interpretation standard being proposed will require property developers to recognise revenue from their projects only on completion and not in phases.

Developers are said to be resisting the proposed change in accounting standard which, they say, will result in greater fluctuations in earnings reported by listed property companies.

The new standard is put forward by the Council on Corporate Disclosure and Governance (CCDG) which adopted it from the UK-based International Accounting Standards Board. The CCDG sets accounting standards in Singapore.

The Institute of Certified Public Accountants of Singapore vice-president Ernest Kan said: ‘This will cause earnings of property companies to be more erratic.’

‘Currently, if I started an 18-month project in January, and I complete two-thirds of the project this year, the 2007 financial statement looks nice because I can recognise two-thirds of the revenue and profit.

‘But under the new standard, there will be nothing to show for it in the 2007 financial statements, but next year when the project is completed there will be a sudden surge of revenue and profit which is recognised.’

The proposed change aims to standardise accounting practices among real estate developers for sales of units such as apartments before construction is complete.

The Real Estate Developers’ Association of Singapore said yesterday that it has given feedback to the CCDG on behalf of developers but declined further comments.

Hiap Hoe executive director Cindy Lim said: ‘Financial accounting should reflect the business and economic value generated by companies.’

‘If we were to recognise revenue only upon the completion of a property, it would not be a fair reflection of a company’s performance. Commercially speaking, revenue would have already been generated once the property is sold – even if it is only half completed.’

And the chief financial officer of a listed property developer said: ‘Most developers would prefer the status quo because we don’t want gyrations in earnings.

‘Besides, home buyers here make progressive payments based on completion, and risks are passed on to them accordingly, so developers should be allowed to recognise revenue.’

Dr Kan said the change could be implemented as soon as the financial year beginning on or after Jan 1 next year. The CCDG has gathered feedback on the proposed change and will pass it on to the IASB, which is inviting comments until Oct 5.

‘It will be interesting to see if Singapore will adopt this. It generally wants to adopt international standards, and has only resisted doing so in very unique circumstances,’ Dr Kan said.

 

Source: Business Times 13 Sept 07

Boom resonates in home loan numbers

Number of people with multiple home loans up 64% in June as applications surge

(SINGAPORE) For thousands in Singapore, a single home – or a single loan – is no longer enough. Riding the property boom, with its promise of huge gains, the number of people with multiple home loans soared to 38,520 in June this year.

This represented a 64 per cent jump from 12 months ago. In June 2006, the number of people with two home loans or more stood at just 23,541, according to the Credit Bureau (Singapore) Pte Ltd (CBS), which released data on property loans for the first time yesterday.

In tandem with rising property prices, new home loan applications surged to 17,323 in May. If the past 30 months are a benchmark, then the average month sees just 10,000 new home loan applications.

Also, over the past two-and-a-half years, an average of 4,000 applications have been approved each month. But in May, a total of 4,856 applications were approved, suggesting that while banks had stepped up the pace of approvals, the applications had flooded in even faster.

Loan approval data lags applications as it refers to disbursements which could be a few months later or even as long as two years down the road for borrowers who bought on deferred payment schemes.

June saw 4,794 approvals against 16,017 applications. The breather that the property market then took was echoed in the number of new loan applications, which fell to 13,870 in August.

Property loan approvals increased 12 per cent in June 2007 to 50,514 from a year ago.

Explaining the relatively low rate of approvals compared to the applications flowing in, Mark Rowley, CBS general manager, ventured that people making ‘multiple applications’ could have something to do with it – as could the credit policy of banks.

And while there has been some anecdotal evidence of banks tightening credit, he said it was too early to say if the low rate of approval was a result of that.

Said Helen Neo, head of consumer banking of Maybank in Singapore: ‘A home loan application may be rejected if the applicant’s repayment ability is in doubt taking into account his overall financial commitments.’

Tan Chia Seng, Citibank Singapore business director, said that in the last 12 months, there had been a noticeable increase in big ticket mortgages and multiple home loan borrowers.

‘At Citibank, we always take a prudent approach towards mortgages,’ said Mr Tan.

‘For multiple home loans, it is particularly important to consider the applicant’s aggregate servicing capability for all his loans, especially his home loans,’ he added.

He ventured that one possible reason for the low approval rate could be that the applicants’ aggregate servicing capability for all his loans has fallen below an acceptable level.

‘If the applicant has a disproportionately high debt-servicing ratio, a prudent bank may not approve his application for a second or third home loan,’ said Mr Tan. ‘In our case we have been declining loans to applicants where the debt-servicing ratio exceeds our comfort level.’

CBS said the data, which have been compiled over the 30 past months and used to develop a property loan index, show a hunger for credit to finance properties under the current property boom.

The index showing credit hunger climbed to a high in May, 71 per cent above the baseline or 17,323 new loan applications. Single-day sellouts at various property launches also repeatedly made the headlines.

Home loan approvals jumped 23 per cent in May to 4,856. In April, the number stood at just 3,967.

The good news is that along with the relentless climb in property prices, the delinquency rate, or the proportion of borrowers behind with their home loan instalments, is falling.

CBS also charted a delinquency index which shows the percentage of people being late in payments has been declining from the average delinquency rate of 2.35 per cent to just 2.04 per cent as of June 2007.

That works out to 5,448 delinquent borrowers out of the total 266,512.

From a credit risk perspective, it is very positive, said CBS’s Mr Rowley.

‘We will always focus on delinquency as the indicator – it’s low at this point,’ he said.

 

Source: Business Times 13 Sept 07

HK property deals surge to 2-year high in August

Number of deals in August soars to two-year high of 13,664

IN HONG KONG

A SURGE in property deals has fuelled hopes that Hong Kong’s mass market is poised to catch up with the city’s runaway luxury sector.

The number of deals surged last month to a two-year high of 13,664, an increase of 22.9 per cent from July and a rise of 58.3 per cent from August 2006. In the past six months, the figure has exceeded 10,000, signalling a consistent shift upwards.

The total amount paid for these sale and purchase agreements came to HK$44.2 billion (S$8.6 billion), an increase of 16.3 per cent over the previous month.

The figure represents a hefty 76.3 per cent increase compared to the amount paid in August 2006.

Hong Kong’s mass residential market has been a notable laggard over the past two years as the luxury sector took off. Sales in up-market locations such as the Peak and the South Side of Hong Kong Island have well outstripped 1997 levels.

Luxury residential sales in Hong Kong are expected to post double-digit growth this year as limited supply and an influx of capital to the city pushes up prices. Property firm Savills expects the luxury sector to post growth of 16 per cent in the 12 months to April 2008.

This follows stellar growth in 2006, in both sales and leasing.

However, the mass market has grown by just a few percentage points each year, and still remains below 1997 levels. This is against a backdrop of strong economic growth, the city experiencing GDP of 6.8 per cent last year and unemployment standing at just over 4 per cent.

While luxury sales are at 1997 levels or above, the mass sector is still about 20 per cent short. Residential property on Hong Kong island is 20-25 per cent below 1997 prices, while prices out in Kowloon and the New Territories could be as much as 40 per cent below.

Market players are hoping the latest transaction figures signal healthy buying power and renewed interest in buying a home.

Others are however sceptical. ‘The mass market is ticking over quite nicely,’ said Maggie Brooke of Professional Property Services. ‘But we don’t see anything major.

‘I know things are going well, but people are still nervous about buying . . . they really aren’t inclined to get in above their heads. It (the property downturn of 1997-98) is still in peoples’ minds.’

Many home buyers are still stinging from the Asian financial crisis, after which the value of their homes fell by up to 40 per cent, often to less than the level of the housing loans they took out to buy the homes.

Another factor potential buyers are taking into account is that developers have been reluctant to drop their prices, despite ample supply in the mass sector.

‘People buying have to ask themselves, ‘is it worth it?’ Ms Brooke said.

In its annual property review, the rating and valuations department of the government said it expects less property completions in 2007, reflecting a year of modest demand, but said they should bounce back again in 2008.

Take-up rates for domestic properties were down 6 per cent overall last year, while prices went up by just 3 per cent.

 

Source: Business Times 13 Sept 07

CBRE, Savills open new offices

PROPERTY firm CB Richard Ellis (CBRE) is set to open its office in Koh Samui, Thailand, while its competitor Savills officially opened its office in Dalian, China, yesterday. CBRE’s office opens tomorrow.

The group, which already has offices in Bangkok and Phuket, said in a press statement yesterday that the move was in response to growing investor demand, and the number of quality developments on the market.

The Koh Samui office will offer a full range of services, including residential sales, investment and land services, research and consulting, and valuation services.

It will be supported by CBRE’s regional offices in Asia and will be part of a larger business plan to roll out a high-end luxury properties platform.

Separately, integrated property services provider Savills yesterday launched its Dalian office, bringing the group’s total number of offices in China to eight, with staff strength estimated at 3,000.

Earlier this year, Savills also opened offices in Tianjin and Chengdu. Savills Dalian offers full agency services, including residential sales, commercial and retail leasing, property management, research, development and consultancy, and valuation.

Shu Zhong Hua, a real estate veteran with over 10 years’ experience in China, has been appointed general manager of the Dalian office.

At the opening ceremony, Savills also announced their appointment as property management consultant for Jguang East Coast, a 120,000 sq metre high-end residential project located in Dalian’s eastern Zhongshan district. The project is expected to be launched at the end of this month.

 

Source: Business Times 13 Aug 07

Jones Lang plans mall mgmt JV in China

(BEIJING) Global real estate services company Jones Lang LaSalle (JLL) is in talks with a shopping centre management firm to establish a 50-50 joint venture in China, a senior company executive said yesterday.

Managing director David Hand said the company ‘is looking at doing a merger – a joint venture with an overseas expert in shopping centre management’ to strengthen its hand in a market where the world’s top retail brands are swarming in.

If everything goes smoothly, ‘by the end of the year, we will be able to announce it’, he told reporters.

Mr Hand, who is also head of Jones Lang LaSalle’s China retail division, did not name the prospective partner.

He said the deal would make JLL the largest shopping centre management company in China and in Asia as well.

JLL provides management and leasing services to many shopping malls in China, including new developments in downtown Beijing. Its rivals include DTZ Holdings and CB Richard Ellis.

Mr Hand added that JLL would move its regional headquarters to China from Singapore to capitalise on Bejing’s drive to spur consumption in order to wean the economy off investment and exports.

He did not say when the move would occur. ‘In the future, China will be our strongest growth engine,’ he said.

Mr Hand said he expected Beijing to roll out more measures to rein in foreign investment in Chinese property.

China has ordered foreign investors to register onshore and put more of their own money into their China ventures.

Mr Hand said the process of investing in Chinese real estate had become more cumbersome, but added: ‘It’s not stopping money coming in and out.’

 

Source: Reuters (Business Times 13 Sept 07)

House prices in Chinese cities up 8.2% in August

The government has pledged to tame the wild property market

(BEIJING) House prices in 70 large and medium-sized Chinese cities were up 8.2 per cent in August compared with last year, as the rising trend continues to show no sign of stopping, according to latest statistics released yesterday.

The rise actually hit a new high and was 0.7 percentage points higher than the July figure, according to a report by the National Bureau of Statistics (NBS) and the National Development and Reform Commission.

The prices of newly-built commercial housing units were up by 9 per cent in August, 0.9 percentage points higher than the rise in July.

The prices of low-cost housing rose 3.1 per cent and the prices of luxury housing went up 10 per cent.

The cities of Beijing, Shenzhen, Beihai and Urumqi saw price hikes of more than 10 per cent, with Beihai the highest at 18.2 per cent.

The housing prices in Beijing went up 13.5 per cent and the prices in Shenzhen were up 17.6 per cent. Prices of second- hand houses in those cities were up by 7.8 per cent.

Rising house prices have been a major concern of the Chinese people in recent years as new houses are too expensive for most urban residents.

Ordinary consumers are often scared into buying a house for fear that they will pay even more if they keep waiting as prices continue to rise.

The Chinese government has pledged to tame the wild property market but house prices have rocketed over the last few years despite round after round of government measures including restrictions on housing ownership by foreigners. Speculation by domestic and overseas investors has been blamed as one of the main reasons for the price hikes.

China’s real estate investment soared 28.5 per cent from a year earlier to 988.7 billion yuan (S$200.3 billion) in the first half of 2007, according to the NBS.

Analysts attributed the rising investment to booming housing demand, excessive liquidity and robust housing price hikes.

 

Source: Xinhua (Business Times 13 Sept 07)

Ascott’s China service residences lauded

It plans to grow its China portfolio to 10,000 units by 2010

THREE service residences managed by The Ascott Group have been named ‘China’s Best Serviced Apartments’ by Forbes China magazine.

Ascott Beijing, Ascott Shanghai Pudong and Somerset Olympic Tower, Tianjin were among 15 winning projects chosen from 100 short-listed in Beijing, Dalian, Guangzhou, Shanghai, Shenzhen and Tianjin.

Ascott bagged the most awards in the service residence category, created this year to recognise excellence in service, stay experience, facilities and location.

The awards are part of Forbes magazine’s ‘China’s Best Business Hotels 2008′ awards.

Ascott’s CEO for China Ee Chee Hong said: ‘Winning three out of 15 awards is a validation of Ascott’s focus on delivering service and product excellence.’

Ascott is the largest international service residence owner-operator in China, with a total of about 4,000 units in Beijing, Dalian, Guangzhou, Shanghai, Shenzhen, Suzhou, Tianjin, Xi’an and Hong Kong.

The group plans to grow its China portfolio to 10,000 units by 2010. It has won numerous brand and property awards.

In April this year it clinched the China 2007 ‘Top 100 Serviced Apartments Award’ for the fourth year running.

 

Source: Business Times 13 Sept 07

Sub-prime crisis needs multilateral solution

By ANTHONY ROWLEY

TOKYO CORRESPONDENT

NORMALLY, when there is a major financial crisis of one kind or another, it is easy to find someone to blame. In the case of the Asian crisis 10 years ago, for example, fingers were quickly pointed at the International Monetary Fund (IMF). When Japan’s bubble economy collapsed, the Bank of Japan (BOJ) was identified as the villain. Also, former US Federal Reserve chairman Alan Greenspan blamed ‘irrational exuberance’ among investors for the rise and fall of the IT bubble.

But whom are we supposed to blame for the crisis that is still evolving out of the sub-prime mortgage market debacle in the US? No one has mentioned the IMF this time and the BOJ has been only indirectly implicated for allowing the yen carry trade phenomenon to swell to proportions where it contributed to a global liquidity bubble. As for irrational exuberance, stock markets can scarcely be blamed this time around.

It is no use pointing fingers at the likes of any single institution. The truth of the matter is that none of these institutions has been given the authority to deal with a ‘new style’ financial crisis such as the current one. I was chatting about this the other day with Japan’s former vice-finance minister for international affairs, Eisuke Sakakibara and he was quick to go to the heart of the matter. The IMF, he declared has become ‘irrelevant’ as an agent for dealing with global financial issues and so has the G-7/G-8. Both should be ‘abolished’, he (only half) joked.

What does this have to do with the sub-prime crisis? A good deal, because the same kind of outdated mentality which allows seven or eight countries (half of them European) to pronounce upon global economic issues, and control the IMF, is also responsible for allowing problems for global fall-out to develop within national borders.

On top of that, there is the arrogance of financial markets which until recently were bold in declaring that multilateral institutions such as the IMF were no longer necessary and that the markets could police the new world financial order by themselves.

If the current financial crisis does not convince both governments and markets of the need for a ‘new financial architecture’ then surely nothing ever will. Money moves around the world nowadays in amounts that make official resources look puny and with a speed and complexity that is matched only by rockets and rocket science. Financial engineering produces products of such complex nature that they can be understood only by rocket scientists. The potential that these developments have to do harm as well as good is enormous, and yet the ‘control centre’ is still in the steam age.

True, there are institutions such as the Bank for International Settlements (BIS) to deal with central banking issues on a global basis and there are any number of national financial and accounting regulatory bodies. But none of these has the power to demand the kind of information that might have indicated just what kind of risks were developing in the sub-prime mortgage market, the financial derivatives market, the yen carry trade area and so on. What then of the IMF? Mr Sakakibara has little doubt about what is wrong there. ‘The IMF is too macro-oriented’, he told me. ‘It needs to go deeper into finance. World finance has changed and they need to address issues like sub-prime issues or systemic risks in international financial markets, rather than sticking to outdated macro-economic analysis.’ Some might add that since the days of former managing director Michel Camdessus, the IMF has become too preoccupied with Third World issues of poverty and development, to be able to focus on global financial market and exchange rate issues.

But this is not so much the fault of the IMF as of the G-7 governments who insisted that they could manage complex issues of global finance on their own, forcing the IMF to find new activities at the margin. This is as absurd as it is presumptuous. No national government has the intellectual resources (or the budget) to analyse the global financial system in all its evolving complexity, let alone the authority to intervene when problems arise. In Mr Sakakibara’s view, the only hope is a new and expanded government group, such as the G-20, to consider global policy issues and a more focused IMF to provide the analytical and research back-up needed.

Yet, the kind of arrogance which allows so-called superpowers to ignore the United Nations in security matters and to prefer unilateral solutions would surely doom any such initiative from the outset. Perhaps the failure of military intervention in Iraq – based on the doctrine of pre-emptive strike – to secure any lasting solution to the problem of ‘terrorism’ might induce sufficient humility to consider reverting to multilateral solutions. But that won’t happen before the sub-prime crisis has done a lot more damage than it has already.

 

Source: Business Times 13 Sept 07

Billionaire expects to do well in Marina Bay Sands gambit

WITH just one competitor in town, Las Vegas Sands chairman Sheldon Adelson believes his company has a winning hand in its upcoming Singapore venture.

Even as costs of building the Marina Bay Sands integrated resort look set to swell, the American billionaire is counting on the two- horse race – and a big bet on the convention business – to translate into big bucks.

‘This will be a duopoly and, of course, any place that has a duopoly will be very profitable,’ said Mr Adelson yesterday at the Forbes Global CEO Conference.

Speaking in a public interview after receiving a lifetime achievement award from Forbes magazine president Steve Forbes, Mr Sheldon added that his mega project will have enough space to host the world’s biggest conventions.

Las Vegas Sands pipped three other rivals last year with a $3.85billion bid for a government tender to build Singapore’s first integrated resort.

But rising construction costs amid a building boom and refinements to the project’s design may bump up the amount, which excluded a fixed land price of $1.2 billion, by as much as 40 per cent, The Business Times quoted chief operating officer William Weidner as saying last month.

Malaysia’s Genting International is building Singapore’s second gaming development on Sentosa island.

Las Vegas Sands’ Singapore resort will be the company’s second foray into Asia, after it opened a US$2.4 billion (S$3.6 billion) casino resort in Macau last month.

Mr Adelson said the region has room for 10 more of these mega developments, as gaming becomes increasingly accepted as just another form of entertainment.

‘I see the gaming industry as being in its infancy.

‘Gaming has evolved from gambling dens into Disneylands for adults,’ said Mr Adelson, who reckons that other parts of the world, such as Europe and India, could do with more mini Las Vegas-styled casino resorts.

These developments, he said, are really ‘cities of entertainment’ where gambling is just one of the elements.

Gaming takes up just 1 per cent of the space of the company’s flagship Venetian resort in Las Vegas, and just 5 per cent in its Macau outfit, he added.

‘This will be a duopoly and, of course, any place that has a duopoly will be very profitable.’

He is counting on the two-horse race between his firm and Malaysia’s Genting – and a big bet on conventions – to result in big bucks.

 

Source: The Straits Times 13 Sept 07

More consumers with two or more property loans now

Number surges by 64% from a year ago; level of new loans rises by 12%

AMID Singapore’s property boom, the number of investors with two or more property loans shot up by 64 per cent in June from a year earlier.

And the number of borrowers owing more than $1 million in property loans was up nearly 26 per cent that month, according to new figures from Credit Bureau (Singapore). New property loans, too, rose 12 per cent from a year earlier to hit 50,514 in June.

All these inaugural figures from the bureau’s latest property market credit analysis show a surge in demand for credit amid Singapore’s property boom.

The trend is captured by the consumer credit bureau’s property loan index unveiled yesterday.

The bureau is an independent body that collates data on borrowing trends in Singapore.

The data is derived from loan data provided by 10 members including ABN Amro Bank, CitiBank, DBS Bank, OCBC Bank, Standard Chartered and United Overseas Bank. It includes loans for private and HDB properties, and other types of properties.

A total of 38,520 consumers were holding multiple property loans in June, the data showed.

The largest number of these consumers was concentrated in District 19 (Serangoon Gardens, Hougang and Punggol) with 3,263 borrowers. Other districts with a relatively large number include District 10 (Ardmore, Bukit Timah, Holland Road), District 15 (Katong, Joo Chiat, Amber Road) and District 23 (Hillview, Dairy Farm, Bukit Panjang).

In June, there were 12,884 consumers owing more than $1 million in property loans. Most of them were from District 10 (2,033) and District 15 (1,218).

Apart from the demand for new loans, the index tracks the approval rate of new loans and the rate of delinquency for such loans.

In June, just over 2 per cent of consumers holding on to about 181,000 loans were delinquent – meaning that they have loans that were more than 30 days overdue. This is healthier than the baseline average of 2.35 per cent.

The bureau’s general manager, Mr Mark Rowley, said it devised the index to provide an early insight into the developing trends in property loans as there is ‘a lot of heat’ in the property market.

‘Delinquency is low at this time, but it is a lead indicator. From a credit risk perspective, if delinquency goes up, that is when we take note of a trend change.’

The data comes amid much talk that banks are tightening the way they lend money to finance home purchases.

‘If banks tighten their lending policy, there would be a widening gap between credit demand and approvals,’ said Mr Rowley.

The demand for new loans, which peaked at 71.77 points on the index in May, slipped in July and last month.

But it is still above the average.

Mr Rowley said the loan approval figures for July appear to be tapering off, as there is a time lag in the bureau getting the credit approval figures.

‘They would be around the baseline figure, which shows that the gap is still maintained.’

The bureau will post an updated monthly property loan index on its website. It can be accessed free of charge.

The bureau will also soon issue similar indexes for credit card loans, personal loans and motor vehicle loans.

Property Loan Index 

 

Source: The Straits Times 13 Sept 07

Plan for property developers to change way of reporting revenue

Call for income to be booked only upon completion of a project, not gradually

MANY real estate developers may soon have to change the way they treat sales revenue in their financial accounts.

Under a proposal submitted by the Council on Corporate Disclosure and Governance, developers will have to recognise revenue only upon completion of their projects – instead of doing so gradually, as the projects are being built.

Mr Ernest Kan, vice-president of the Institute of Certified Public Accountants of Singapore (Icpas), which assisted in preparing the proposal, said yesterday: ‘Most developers now recognise revenue progressively.

Under this new interpretation, you can only recognise it as revenue upon a temporary occupation permit, unless you are providing construction services.

‘Most developers here would not fall into that category, as they are only involved in sales, not construction and allowing the buyer to decide what to build.’

Dr Kan said the proposal has been submitted to the industry’s international body. It should make a decision by year-end.

‘The earliest it would have an impact here is during financial year 2008,’ he added.

He said the current interpretation meant revenue flow is more even. Under the proposal, revenue will tend to ‘become more lumped up’. This move aims to standardise the accounting practice among developers.

Currently, developers interpret the global Financial Reporting Standards (FRS) differently and record revenue for the sale of units at different times.

Some record revenue only when they have handed over the completed unit to the buyer, while others book gains earlier, as construction progresses.

This move proposes that revenue should be recorded as construction progresses only if the developer is providing construction services, rather than selling units.

In some countries, the prevailing practice has been to view the FRS as contracts for the sale of goods; in this case. completed real estate units, for which FRS 18 is the applicable accounting standard.

Applying this standard, revenue is recorded only when control – and the risks and rewards of ownership – are transferred to the buyer, typically when the unit is ready for occupancy and handed over to the buyer.

In other countries, the practice is to view the sales agreements as construction contracts, for which FRS 11 is the applicable standard.

Applying this standard, revenue for constructing an asset for a customer is recorded as construction progresses – by reference to the stage of completion of the construction.

The new draft proposes that FRS 11 be used only if the sale agreement is a contract to provide construction services to the buyers’ specifications.

Analysts say the proposed change will result in more volatile earnings. However, it should not affect pricing and cash flow.

Said DBS Vickers property analyst Wallace Chu: ‘The money’s still in the bag. It’s just how you recognise it when it comes in.

‘It will affect those developers who are involved in long projects more. Revenues are likely to fluctuate for those with big projects, especially when there’s a long construction period.’

 

Source: The Straits Times 13 Sept 07

Rising costs here a big problem, say finance execs

Higher rents, property prices cited in survey of 508 professionals from S’pore and HK

MORE than six out of 10 finance industry professionals in Singapore, both locals and expats, regard the rising cost of living here as ‘a big problem’, a recent poll has found.

This hike in living expenses may ’cause the city to lose its appeal among finance professionals, both locally and abroad’, according to eFinancialCareers.com, a global online network site for jobs in asset management and investment banking.

Its poll of 508 professionals – 390 from Singapore and 118 from Hong Kong – found that 56 per cent of them considered Singapore’s rising cost of living to be ‘a big problem’.

Of the Singapore-based professionals, 246 of them, or 63 per cent, felt that way. The poll, which focused only on Singapore, sought the views of Hong Kong-based professionals too as they might consider a job here.

Still, some professionals point out that while costs have risen in Singapore, the Republic is still far cheaper than centres like London.

The other respondents in the poll saw no problem in higher costs (6 per cent of them), or felt it was ‘to be expected’, ’slight’ or ‘very small’.

Higher rentals and property prices were cited as the biggest bugbear. But rising parking costs and relatively pricey cars were also becoming a bigger concern.

ABN Amro’s head of business banking sales for Asia, Mr Jan-Arie A. Bijloos, moved here a year ago and has watched rents ‘go up quite dramatically’ in the River Valley area where he lives.

‘Cost of accommodation would be a concern in a year’s time if my salary does not rise in tandem to compensate for it,’ he said.

But the Government has said that it will monitor the market to ensure there is sufficient supply of homes. It will also be releasing more residential sites for sale in the second half of the year.

Investment banker A. Cohen, a self-termed ‘Broadway arts buff’ who moved here from Manhattan in May, groused about ‘unpalatable ticket prices’ for artistic performances.

Indeed, Singapore overtook New York in a recent ranking of the world’s most expensive cities by Mercer Human Resource Consulting.

Hikes in accommodation costs catapulted Singapore to 14th place, from 17th place a year ago, in the ranking.

Meanwhile, Hong Kong dropped from fourth to fifth place this year. This prompted Ms Sarah Butcher, global editor of eFinancialCareers.com, to note that the shrinking gap between the two cities could impact the ‘movement of finance talent between the two markets’.

But costs here were ’still manageable’ compared to elsewhere, where prices have also risen, said bankers such as Mr Salman Haider, from Citibank Singapore.

Moving here from London a year ago, he found Singapore also boasts pull factors such as ’security and a great educational system’.

‘Singapore is one of the most liveable cities in the world and certainly one of the best to bring up young children,’ he said.

 

Source: The Straits Times 13 Sept 07

Ang Mo Kio condo site sets record

Far East’s $202.9m winning bid means suburban project may eventually launch at over $1,100 psf

(SINGAPORE) A plum condominium site in the heart of Ang Mo Kio has set a new record for suburban land prices, fetching some $601 per square foot per plot ratio (psf ppr).

And when the project is eventually launched, it could set a record for private home prices outside the central areas, analysts said.

Yesterday, HDB said that Far East Organization put in the top bid for the 0.6-ha mass market condo site at Ang Mo Kio Avenue 8. The developer beat 13 other bidders with its bullish offer of $202.9 million – which works out to $601 psf ppr .

‘The price is probably the highest paid for a suburban site in recent years,’ said Donald Han, managing director of property firm Cushman & Wakefield.

Analysts said that Far East’s bid for the 99-year leasehold site beat market predictions that the top bid would be around $500 psf ppr.

Far East’s break-even cost for the site is now estimated to be in the region of $900-$1,000 psf, which means that units in the project could eventually be launched at $1,100-$1,200 psf – a record for private home prices in the suburbs.

‘If Far East can achieve prices of around $1,200 psf for the project, then yes, it will be a record for the suburban areas,’ said Ku Swee Yong, Savills Singapore’s director of marketing and business development.

By comparison, units in other projects in the vicinity – albeit in less attractive locations – are mostly going for around $400-$600 psf.

Far East’s bid was 11.8 per cent higher than the next highest bid of $538 psf ppr put in by Chip Eng Seng.

The bid was 68.9 per cent higher than the lowest bid of $356 psf ppr bid jointly put in by Wing Tai Holdings and United Engineers.

Far East also beat out other big names such as CapitaLand, Hong Leong Group and Frasers Centrepoint.

Experts said that the high prices and large number of bids signalled that developers had confidence in the strengthening suburban residential market – notwithstanding the US sub-prime mortgage fears that rattled stock markets here.

The plot also drew strong interest due to its good location. It is situated right next to Ang Mo Kio MRT station, and is just 15 minutes away from Orchard by train.

‘With an increase of 4.2 per cent in overall HDB resale prices in the past six months, more HDB households would be poised to upgrade to this conveniently located private development,’ said Li Hiaw Ho, executive director at CB Richard Ellis’ research unit.

Units in the project could be sought-after by HDB upgraders in the Bishan and Toa Payoh estates – where HDB resale prices command a premium – as well as Ang Mo Kio itself, Mr Li said.

In addition, the project may also prove to be attractive to private homeowners in Serangoon and the Thomson / Upper Thomson Road areas, he added.

The site, which was on the government’s reserve list, was launched in July after an unnamed developer bid $102 million, or $302 psf ppr area for it.

 

Source: Business Times 12 Sept 07

HDB launches design, build and sell site at Ang Mo Kio

THE Housing and Development Board has launched a third Design, Build and Sell Scheme (DBSS) site for sale. The latest site, which is at Ang Mo Kio Street 52, is the second to be launched for sale this year.

The site area is 16,789.1 sq m (180,716 sq ft), with an allowable gross floor area of 58,761.85 sq m (632,506 sq ft). It is close to the Ang Mo Kio town centre with its MRT station, bus interchange and the AMK Hub.

Noting the attractive location of the new site, Savills Singapore director of marketing and business development Ku Swee Yong said that he believes the site could fetch between $110 million and $125 million or about $170 to $200 per square foot per plot ratio (psf ppr).

The development is targeted at HDB upgraders or en bloc sale downgraders, and Mr Ku said that he expects a good take-up because the stock of vacant HDB flats has fallen of late.

Mr Ku highlighted that recent suburban condominiums like The Parc condominium in the West Coast and The Soleil at Novena had sold well, ‘even though this is traditionally a quiet month for property sales’.

The successful developer will be required to build a minimum of 30 per cent of the flats with a floor area of 95 sq m or less – equivalent to flats of four rooms or smaller.

CBRE Research estimated that the site can yield more than 500 units. CBRE added: ‘Given the established residential environment in Ang Mo Kio, together with the known popularity of DBSS units, we expect a good response from mid-sized developers and joint venture of contractors and developers.’

Upon building completion, the successful developer will hand over the entire development site to the HDB for lease administration, and to the Town Council for maintenance of the common areas and car parks.

The tender will close at noon on Tuesday, Nov 27.

The second DBSS site, at Boon Keng Road, was awarded in June. It sold for $233.74 psf ppr – double the $113.64 psf ppr price for the first DBSS site in Tampines sold in Jan 2006.

 

Source: Business Times 12 Sept 07

Q3 may see slowdown in private home sales

But new launches may accelerate activity again, say market watchers

(SINGAPORE) Private home sales are expected to slow this quarter – the result of the twin effects of the US subprime woes which made the headlines in August and the just-ended Hungry Ghost month.

But the pace of activity is expected to pick up again as developers step up launches and confidence recovers, say property market watchers.

Fresh price benchmarks may still be set for projects offering compelling propositions, but developers are likely to tread carefully before upping prices.

CB Richard Ellis (CBRE) estimates that the total number of new private homes sold by developers in the primary market during Q3 will be 3,500-4,000 units including sales from ongoing projects. This is lower than the 5,129 units sold in Q2 and 4,783 units transacted in Q1 this year.

Activity also decelerated in the secondary market in Q3. ‘Whereas the first and second quarters saw resale volumes of 4,645 units and 6,514 units respectively, it is likely that Q3 figures will be lower, probably in the region of 4,000 to 4,500 units,’ CBRE executive director Li Hiaw Ho says.

‘Anecdotal evidence suggests that subsale activities have been muted as investors become more cautious,’ Mr Li added. Subsales as a percentage of total private housing sales are likely to fall below the 7.4 per cent and 9.7 per cent in Q1 and Q2, he predicts.

Subsales, often used as a gauge of speculative activity, involve projects that have yet to receive a Certificate of Statutory Completion, while resales, which are also secondary-market transactions, cover completed developments.

But the current slowdown in activity is not such a bad thing, says DTZ Debenham Tie Leung executive director Ong Choon Fah.

‘The market has been going up quite dramatically. It’s good that people step back and evaluate their positions before moving on. This window also creates an opportunity for people to enter the market. When the market is so hot, everytime you put in an offer at the seller’s asking price, he raises his price,’ she says.

Ong Chong Hua, executive director of Ho Bee Investment, also describes the current slowdown as ‘a healthy consolidation after a robust period of growth in sales volumes as well as prices’.

‘Activity will start picking up slowly and I think confidence will come back, as developers start launching more projects. Buyers will be cautious but underlying demand is still strong. The share market seems to have consolidated and strong economic fundamentals are still in place for Singapore and the Asian region,’ he said.

Among the projects expected to be released soon are MCL Land’s Hillcrest Villas cluster terrace homes along Dunearn Road, Ho Bee’s Turquoise condo at Sentosa Cove, Bukit Sembawang’s Paterson Suites and SC Global’s Hilltops in so said to have Cairnhill. CapitaLand is albegun selling Latitude at Jalan Mutiara at around $2,800 per square foot on average.

Projects that are slated for launch in Q4 include Lippo’s condo on Sentosa Cove, Ritz-Carlton Residences at Cairnhill, and the second phase of Marina Bay Financial Centre.

Says DTZ’s Mrs Ong: ‘Sales activity may be slow for the next couple of months, but this will depend on the type of projects launched and their price points. If developers release projects that are targeted at home owners, demand is still very much there. But if they’re targeting investors or want to set benchmark prices, buyers will take a longer time to consider.’

Ho Bee’s Mr Ong said: ‘Developers will definitely be more cautious in moving up prices and trying to set benchmarks all the time. They will test the waters.

‘But I don’t think anybody will cut prices because fundamentals are still strong. There’s still a shortage of homes, with a lot of those who sold their homes in en bloc sales looking for replacement properties.’

CBRE’s executive director (residential) Joseph Tan reckons that the market could still see benchmark prices if the right kind of products are offered, such as branded residences.

Looking to the final quarter of 2007, the residential market will remain active as the government’s projected economic growth rate of 7 to 8 per cent for 2007 remains on track. ‘If developers sell around 3,000 to 4,000 units in Q4, then the total number of new homes sold in 2007 will be a new record of 17,000 to 18,000 units,’ CBRE’s Mr Li said.

This will be significantly higher than the 11,147 units sold in the primary market last year.

 

Source: Business Times 12 Sept 07

Property boom far from over: Kwek Leng Beng

CITY Developments executive chairman Kwek Leng Beng believes that the property boom here is far from over, despite the current financial market turmoil.

‘The boom actually just started in 2005, and if you’re thinking of a relapse, I don’t think that is possible,’ he told chief executives yesterday at the Forbes Global CEO Conference.

‘Sub-prime has to some extent affected Singapore … there’s a psychological fear of what will happen.’

But ‘our banks are still lending a lot of money’, Mr Kwek noted. ‘They’re a little bit more cautious, but we have plenty of liquidity.

‘The banking and financial systems here are very well controlled … they are well regulated and the central bank has taken action to pre-empt crises like what you’ve seen in sub-prime.’

The property tycoon, who is also chairman of Millennium & Copthorne Hotels, was speaking at a panel discussion on global real estate trends.

He said that, after adjusting for inflation, high-end residential property prices have risen only about 10 per cent in real terms from their lowest level over the past decade, ‘which is not alarming’.

He said: ‘My advice is, look at it realistically – crisis means opportunity. I’m a bottom-fisher, I like to go in when the market is bad.

‘I believe there’s still a lot of upside. The mid-end is still 19 per cent below the peak of ‘96.’

In addition, he said Singapore had introduced a lot of initiatives over the past 10 years to attract foreigners to live and work here, which has fuelled demand for property.

‘You may say it’s very dull, but we are going to have the integrated resorts, Formula One, and a host of other events that will make Singapore an exciting city to live, work and play.’

Other panellists were also optimistic on the prospects for further growth in property development in China, India, and the Middle East.

Vincent Lo, the chairman and chief executive of Hong Kong-based Shui On Group, who was also on the panel, said he was ‘very bullish’ on the property market in China. ‘We have waiting lists for our office space till 2010.’

Kushal Pal Singh, chairman of DLF Group, the largest real estate developer in India, said there remained a ‘huge gap between demand and supply’ of residential property there.

Hayan Merchant, chief executive of Dubai-based Ruwaad Holdings, said the current pace of development in Dubai and the United Arab Emirates more generally was ‘unprecedented’.

The property, hospitality and tourism investment and development company is looking at moving into Asia ‘in the next three to five years’, Mr Merchant told reporters in a separate briefing. He said Ruwaad was looking particularly at Singapore, Malaysia, China and India for expansion opportunities.

 

Source: Business Times 12 Sept 07

Big fall in Hungry Ghost month auctions this year

Market conditions cited for sale of only 10 out of 131 properties offered

OF the 131 properties put up for sale by auction during this year’s Hungry Ghost month, just 10 were sold – for a total value of $9.56 million – new data from property firm Colliers International shows.

This figure is one of the lowest seen in the past 10 years. The Hungry Ghost month was from Aug 13 to Sept 10 this year.

Colliers attributed the low sales volume to the current property market condition, factors affecting the world economy and new government policies – rather than buyers holding back their purchases during the Hungry Ghost month.

‘Given the good property market performance, many sellers have raised their expectations and upped their asking price; this is especially so for properties with en bloc potential,’ said Grace Ng, Colliers’ auctioneer. ‘This, coupled with the newly announced rules governing en bloc sales as well as the stockmarket turmoil amidst the US subprime woes, has caused a slowdown in the market as buyers took a cautious stand.’

Just three residential properties were sold during the Hungry Ghost month this year, generating a total sale value of $4.07 million – a far cry from last year’s $108.41 million, which was mainly contributed by the sales of 12 bungalow parcels in Sentosa Cove.

The number of properties put up for auction during the Hungry Ghost month this year – at 131 – was also a substantial 64 per cent drop compared to last year’s Hungry Ghost month.

Last year, the market saw a total of 359 properties being put up for auction sale as the Hungry Ghost month was spread across two calendar months.

Colliers also said that the total number of repossessed properties seen at auction sale during the Hungry Ghost month this year was only 43 – the lowest figure since 1998.

‘This decline is largely due to the buoyant economy and robust property market,’ the firm said. ‘Owners who faced difficulties servicing their loans were able to dispose of their properties in the open market before their bank or financial institution had a chance to repossess their properties.’

However, the auction method continued to be popular with owners for selling their properties during the Hungry Ghost month.

Colliers’ data shows that this year, some 88 properties were put up by owners for auction sale during the period.

This is the second highest number registered in a decade after 2006.

‘The continued high number of owners choosing auction to dispose of their properties indicates that the market is maturing, with an increasing number of property owners becoming less mindful of conventional taboos,’ Ms Ng said.

 

Source: Business Times 12 Sept 07

Dreaded R-word heard again amid credit crunch

THE dreaded R-word is now becoming commonplace as the complex sub-prime and credit crisis takes hold in the US and Europe.

The International Monetary Fund (IMF) and the Organisation For Economic Development (OECD) have cut their US and global growth forecasts. Blue Chip Economic Indicators surveyed 50 economists who believe that there is a one in three chance that there will be a recession in the US. A tiny minority predict that it will spread to Europe and parts of Asia.

The global economy’s prospects can no longer be divorced from the banks’ credit crunch. The crisis is the result of excessive lending, not only in the US but in Europe, China and other parts of Asia.

American, British, French, Spanish and Italian consumers, comfortable with the rising value of their homes, borrowed as much money as possible to finance spending on a variety of goods and holidays.

Huge flows of money poured into stocks, real estate and commodities. Hedge and private equity funds and other speculators leveraged themselves to the hilt. They borrowed excessive amounts to trade and purchase a variety of inflated assets.

The Bank of International Settlements and economists such as Brendan Brown of Mitsubishi UFJ Securities International and Stephen Roach of Morgan Stanley warned of the excesses.

So did Yale’s behavioural finance professor Robert Shiller. But in the heady final phases of bull markets, participants are only too happy to cast derision at their views.

As so often happens during rampant speculation, a single, relatively unimportant event, has changed the course of the market. The June collapse of two Bear Stearns hedge funds precipitated the current credit crunch.

Compared with the trillions that wash around the financial markets and much bigger recent hedge fund collapses, the US$1.6 billion bankruptcy seemed ’small potatoes’ as the Guys & Dolls humorist Damon Runyon put it.

But those funds had borrowed US$10 billion to US$20 billion and punted on sub-prime debt and other junk. Their failure made the market stop and think. How many others were caught? The result was a vicious circle.

Banks began to scrutinise their credit lines to hedge funds, forcing them to dump assets, causing price declines, losses, investor withdrawals, loan reductions, more sales and hedge fund closures.

The jittery state of the markets indicates that the circle is still turning, although bargain hunters are precipitating rallies from time to time.

The big question for the global economy is to what extent will banks rein in credit and put the screws on consumers and businesses.

Goldman Sachs, Morgan Stanley and several other investment banks are taking a sanguine view. They believe that there will be a downturn in the US economy, but interest rates and the US dollar will fall.

A recession is unlikely and Europe and Asia could well decouple from the US. The proverbial American sneeze will not be contagious.

Tighter credit and higher interest rates have already brought about a slide in American real estate prices.

Mr Brown of Mitsubishi UFJ Securities International contends that the decline is already dampening business and consumer spending and a recession has already begun.

Most economists and the financial press are examining dated statistics, so they wrongly believe that the US economy is yet to turn downwards, contends Mr Brown.

Prof Shiller of Yale, who predicted the current American property slump, the worst in 16 years, agrees with Mr Brown that Europe cannot be isolated from American economic trauma.

He believes that there is a ’substantial probability’ that the housing slump in the US could well spread to the UK. There are ‘remarkable’ similarities between the property markets in cities such as Boston and Los Angeles and British cities, he says.

‘People are so accustomed to rising house prices, they do not believe it when someone tells them it will come to an end . . . What we have may be the makings of an economic crisis,’ maintains Prof Shiller.

‘Other countries that are vulnerable to a property slide are Spain and France,’ fears Mr Brown. Banks there are exposed.

Other economists fear that high European exchange rates and tighter credit are already denting the German economy. Saudi officials are worried that high oil and gasoline prices could be pushing some countries toward recession. Since Asia is dependent on exports to the US and Europe, any downturn there would have an impact. It seems the day of economic reckoning is at hand.

 

Source: Business Times 12 Sept 07

Fed officials see threat to growth in sub-prime mess

Concrete risks of broader slump pose downward pressure on economic activity

(WASHINGTON) Three senior Federal Reserve officials said on Monday that the turmoil in housing and mortgage lending had begun to threaten the overall economy, a condition policy makers have said is the crucial test for deciding whether to lower interest rates at their meeting next Tuesday.

A Fed governor, Frederic Mishkin, told an audience in Manhattan that the risk of a broader downturn ‘cannot, in my view, be ruled out’ and ‘poses an important downside risk to economic activity’.

In unusually direct language for a Fed policy maker, Mr Mishkin said that inflation pressures had become less of a problem – a judgment that, if embraced by other Fed officials, would remove a major argument against lowering interest rates.

‘I believe that the risks to the inflation outlook have become more balanced,’ he said, ‘given the greater downside risks to real growth’. Mr Mishkin is a relatively new member of the Fed board, but he was a well-known specialist in monetary policy at Columbia University with longstanding ties to the chairman of the Federal Reserve, Ben Bernanke. In 1997, while Mr Mishkin and Mr Bernanke were university professors, they wrote a book that called on central banks to base policy around a public target for inflation.

In speeches on Monday, two other Fed officials sent a similar message. Janet Yellen, president of the Federal Reserve Bank of San Francisco, predicted that the housing decline would probably continue and would impose ’significant downward pressure’ on consumer spending.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, admitted that an unexpectedly bleak unemployment report on Friday made him more worried about a slump. Neither Mr Lockhart nor Ms Yellen are currently voting members of the Federal Open Market Committee, which sets interest rates. But both sit in on the meetings.

On Wall Street, the debate among analysts was no longer about whether the Fed would reduce rates but by how much.

Several analysts predicted that the central bank will lower the Federal funds rate, for overnight loans between banks, by half of a percentage point, to 4.75 per cent from 5.25 per cent. Until a few days ago, most analysts were betting on a quarter-point cut.

Fed officials in their comments said nothing about how much they wanted to lower rates.

In Monday’s speeches, given before the central bank begins a week-long silent period ahead of its policy meeting, several made it clear they now see concrete risks of a downturn.

In Atlanta, Mr Lockhart went so far as to retreat from a more optimistic stance he had taken a few days ago. He said last Thursday that he had not seen any ‘conclusive signs of weakness in the broader economy’. On Monday, he delivered the same speech but acknowledged that he had been jolted by last Friday’s surprisingly dismal report that the economy had shed 4,000 jobs in August.

In her speech, Ms Yellen said that a housing downturn and tighter credit were likely to cause ’significant downward pressure’ on consumer spending and thus on economic growth.

‘The financial market turmoil seems likely to intensify the downturn in housing,’ she predicted. Even if investors overcome some of their fears, mortgage rates are likely to remain higher on a long-term basis and could continue to push housing prices down.

 

Source: NYT (Business Times 12 Sept 07)

The Fed likely to cut, but cautiously

TO many observers, it appears a foregone conclusion that when the US Federal Reserve meets on Sept 18, it will cut short-term interest rates, possibly by as much as 50 basis points. Some have even called for a 100 basis point cut. It is hoped the subsequent easing of pressure in credit markets will spill over into equities.

While this happy scenario is plausible, it would be wise for investors not to expect too much. While it is likely that the Fed will indeed cut rates, it might not do so as aggressively as many market players predict or hope.

First, too-high rates are not the cause of the problem: much of the blame for the sub-prime mess can be apportioned to outright fraud by the real estate and finance industries and poor risk assessment. Cutting rates will be of limited use in resolving the problem.

Second, at Monday’s G-10 meeting of central bankers, one message was stressed above all others – that although central banks have an interest in securing market stability, it would be a huge mistake to bail out bad investors. Third, Fed chief Ben Bernanke, who was present at that meeting, is well aware that one of the culprits behind the sub-prime crisis was his very own organisation.

In December 2000 following Nasdaq’s crash, the Fed, then under previous chairman Alan Greenspan, began an unprecedented year-long series of rate cuts, reducing the federal funds rate from over 6 per cent to just 1.75 per cent – a level last seen in the 1950s. By mid-2003, two further cuts had reduced the rate to just one per cent. History has shown that when rates fall this low, what typically ensues is a real estate boom or worse, a real estate bubble. This is exactly what occurred in the US, where lax banking and credit industry practices helped fuel speculative demand for housing between 2003-2006, thus sowing the seeds for the present sub-prime crisis.

However, when inflation became a problem and the Fed was forced to raise rates to cope, the resulting pressure on mortgages then triggered the present collapse. Mr Bernanke, well aware of recent economic history, may be keen to impose his own personal stamp on US monetary policy and hold off on a rate cut for the time being.

In fact, there is actually very little reason to bail out Wall Street. Despite all the doom-laden headlines of the past seven weeks, the Dow Jones Industrial Average is still 5 per cent up for the year while Nasdaq’s gain is 6 per cent. From its all-time high, the Dow has only lost 6 per cent, hardly a catastrophic fall that cries out for Fed intervention.

The main reasons markets believe rates will be lowered are last Friday’s weak jobs report and comments earlier this month by Mr Bernanke that the Fed is ready to take action to provide liquidity and promote the orderly functioning of markets.

While the balance of the evidence suggests the Fed will indeed lower rates, it will probably do so in cautious calibrated fashion. Expectations of a hefty rate cut are likely to be misplaced.

 

Source: Business Times 12 Sept 07

Lessons from a blow-up

SHANE OLIVER goes back to the scene of the crime and uncovers the damning caveats

THE last month or so has seen big swings in markets on the back of the turmoil in credit markets. By and large though, most investors should have come through reasonably unscathed. However, some would not have been so lucky. Funds reported to have had the greatest losses seem to fall into three categories – funds with a heavy direct and geared exposure to US sub-prime debt, some of which have seen 80 per cent to 100 per cent of their capital wiped out; funds with a geared exposure to corporate debt which has been caught up in the fallout from the subprime problems; and quantitative equity hedge funds which have been caught out by the volatility in investment markets.

While conceding that the period of share market weakness and credit turmoil ‘ain’t necessarily over yet’, and without getting into the surrounding economic issues and the outlook going forward (which I have covered in previous reports), the blow-up in credit markets provides a number of lessons for investors. Specifically, these relate to financial engineering, diversification, gearing, the fact that there is no such thing as a free lunch and the need to invest in only what you understand.

Lesson 1: Beware of financial engineering

Financial engineering is at the centre of the storm now engulfing credit markets. Mortgages to very low quality borrowers (sub-prime mortgage borrowers) were packaged up into securities (collateralised debt obligations, or CDOs) which were sold off in various parcels, some of which came with high risk like equity but some of which came with AAA credit ratings (the highest possible credit rating).

So, due to the magic of modern finance, a portion of something which was regarded as high risk was able to be marketed as low risk. Hence it was always an artificial construct. And more fundamentally, because of a limited track record (usually just covering the last few years of relatively favourable conditions) risk was dramatically underestimated. Risk was underestimated both in terms of the performance of the underlying sub-prime mortgages and how the securities themselves would behave in times of market stress and poor liquidity (like we have seen over the last few months).

What’s more, this re-packaging and underestimation of risk arguably made the whole situation worse. By encouraging demand for the securities more money became available for lending to sub-prime borrowers which meant that lending standards became ever more lax. Such complex arrangements also led to a poor alignment of interests. Everyone was paid up front – the mortgage originators, the banks underwriting the securities, the ratings agencies, the CDO managers – except the end-investor who held all the risk. And mortgage originators had an incentive to write loans regardless of the quality of the borrowers. On top of all this, these complex securities were poorly understood and irregularly traded, adding to the difficulties involved in undertaking a decent risk analysis.

So when all is going well, there are no problems. But once the underlying investment (ie, mortgages to borrowers with poor credit histories) started to turn sour, the credit ratings proved unreliable. The securities proved impossible to sell because they were so complex and no one really understood them, let alone knew their true worth. And everyone ran for the exits at once.

The key lesson for investors from all this is to be sceptical of investments which rely heavily on financial engineering to meet their objectives, particularly if they haven’t been tested in both good and bad times. Such constructs often have a poor alignment of interests, the true risks may be poorly understood or hidden and, because so many parties are involved, the underlying fees may be excessive.

Lesson 2: Gearing is great – till it isn’t

We all know the benefits of gearing. Investing $1 of borrowed capital for every $1 of your own capital can turn a 10 per cent gross return into a 20 per cent gross return. But of course when returns are negative it can go badly wrong. In fact, very high gearing (eg 5 to 10 times) was at the centre of most of the big fund losses announced recently. For example, if debt is running at five times capital then just a 5 per cent drop in the value of the underlying investments will lead to a 30 per cent drop in the value of the fund for investors, viz: If initial capital in a fund from investors is $1 million and $5 million is borrowed, then the fund’s total investment is $6 million. If the underlying investments fall in value by 5 per cent to $5.7 million the lenders to the fund are still owed $5 million, but the investor’s capital in the fund drops to $0.7 million, or a 30 per cent decline.

Excessive gearing on top of the losses in the underlying securities explains why some funds with direct exposure to sub-prime debt have seen all or most of their value wiped out. It also explains the severity of the decline in value for some funds which were not directly invested in sub-prime related investments, but may have had an exposure to high yield corporate debt, where the decline in value has been modest.

A high level of gearing of this nature can also make the problem a lot worse. An ungeared fund might (depending on the ‘patience’ of its investors and whether it can freeze fund withdrawals if they are not patient) be able to ride out any market turmoil until pricing improves or the underlying securities simply mature by which time any actual losses (eg. owing to mortgage defaults) may be far less than current market conditions imply. But when gearing is huge, the fund’s creditors may seize the assets and sell them into weak markets pushing down their value even further (the equivalent of margin calls). Such fire sales only lock in the losses for investors.

It should also be noted that not only were the funds investing in sub-prime related securities geared, but there was additional gearing in the securities themselves. For example, CDOs that contain sub-prime debt could be up to 25 times geared. In this context it only takes a small increase in mortgage defaults to start causing big losses. As a result, there was effectively gearing on top of gearing.

So be wary of investments that rely on excessive gearing, both at the fund level and in the underlying investments.

Lesson 3: Diversification is good

Many of the funds at the centre of the recent storm appear to have been poorly diversified (particularly those with an excessive exposure to sub-prime related debt) and this has only magnified their losses. More diversified credit focused funds have held up much better.

Similarly, the events of the past month or so have also highlighted the downside of concentrated exposure to hedge funds. Some hedge funds, particularly quantitative long/short equity funds, had a particularly rough month with losses of around 30 per cent being reported at one point.

However, well-constructed funds-of-hedge-funds have generally come through in far better shape.

The point is that investors are always wise to make sure that funds they invest in are well diversified and not overly reliant on a particular type of investment or investment strategy.

Lesson 4: There is no such thing as a free lunch

Investor interest in credit investments and more recently in highly complex yield-based securities has its origin in the long-term decline in interest rates and bond yields on the back of the shift to low inflation over the last two decades.

Somehow, getting a 6 per cent return from government bonds in a world of 2.5 per cent inflation doesn’t sound quite as good as getting a 12 per cent return from bonds in a world of 8.5 per cent inflation (the 1980s). So investors with a desire for a high income flow, such as self-funded retirees, have been prepared to go in search of higher returns moving from government bonds into corporate debt. This was probably all fine because most corporate debt has a long history and so the risk involved can be reliably estimated and managed. In recent years though this has started to morph into funds investing in highly complex securities such as CDOs where risk was less well known.

However, while risk may remain dormant for many years leading investors to forget about it, the events of the past few months highlight that higher returns also come with higher risk. In other words, there is no such thing as a free lunch. The trick for investors is to make sure that they are aware of the extra risk they are taking on and to then make sure that it is managed appropriately in terms of diversification and gearing levels.

Lesson 5: Only invest in what you understand

A key lesson for investors from the events of the last few months is to only invest in what you understand. Modern credit instruments are incredibly complex and it would appear that many (including market participants) did not understand the nature of the investments being undertaken. Until recently most investors would not have known what a sub-prime mortgage was and most would have thought that a CDO was just another acronym for a senior company executive.

The writer is head of investment strategy and chief economist at AMP Capital Investors

 

Source: Business Times 12 Sept 07

Happy investing

Investors need to look within themselves to determine their life goals, before embarking on the road to financial contentment, financial planner Arun Abey tells GENEVIEVE CUA

WHAT does happiness have to do with financial planning? Some may say happiness is the fruit of a well-laid financial plan. After all all, such a plan should foster greater confidence in the future, leading to financial security – and, hopefully, happiness.

But what of the reverse?

Ipac group co-founder and executive chairman Arun Abey believes that getting your life together – in term of your goals and choices – should come first, and financial planning follows. Ipac manages US$9 billion in client assets globally, advising some 20,000 individuals and institutions. It began in Australia and has operations in Hong Kong and Singapore.

‘People use the phrase ‘lifestyle financial planning’ as a slogan. But it’s a real thing. It’s about putting the ‘life’ into financial planning. It’s how the two integrate.

‘I’ve increasingly become convinced that the financial planning part is an outcome. You get the ‘life’ part right and the financial planning is actually easy.’

He adds that the biggest hurdle in financial advisory is that clients typically do not have a clear idea of what they want. ‘I’ve become convinced that an important part of financial planning is getting clients to want what they need.

Clients come in with a list of ‘wants’. Those ‘wants’ are completely unrealistic.

‘They say I want to make a lot of money, but I don’t want to lose any money. That doesn’t work. As Warren Buffett says, give me a bumpy 15 per cent any time. I’d rather take a bumpy ride than no returns.’

Drawing on the experiences of clients, Mr Abey has just published a second book How much is enough?, in which he tackles the amorphous question of happiness and the more mundane but no less challenging issues of financial planning and investing. The book is co-authored with Andrew Ford.

The book is meant to be a companion to his first book Fortune Strategy, published in 2000 , which delves into portfolio construction against a backdrop of the historical pattern of risk and return. Fortune Strategy, he says, explained the behaviour of markets. This time, taking centrestage is the behaviour of investors themselves.

‘If you understand markets, you can do something. I’ve come to understand that that’s not enough. You need to look within to understand your behaviour… People who can be confident, who can manage their behaviour and not worry about what others are doing, are also people who can control their behaviour in investment markets. It’s the same neural pattern, I hadn’t realised that before.’

The book draws on the growing body of research on happiness and behavioural finance, written in a readable, down-to-earth fashion. A few chapters are devoted to the behaviours that can undo the best laid investment plans.

These include loss aversion as a wealth hazard – that is, in seeking to avoid loss, investors actually incur greater losses. In a chapter ‘The Madness of Myopia’, he writes that the more frequently investors evaluate their returns, the more likely they are to make inappropriate decisions.

Several of the foibles come up repeatedly among clients, he says. One is unrealistic expectations. Two is a poor understanding of risk. Risk covers not just a probability of loss, but also the failure to beat inflation. ‘With cash you’ll never see a negative return, but with inflation you’re losing buying power every year. That’s pretty serious. A capital guarantee doesn’t protect you from that.’

Manage your time

A third mistake is the belief that the right timing could be the ticket to success. ‘It’s a very naive belief that you can get the timing right. Over 4,000 days there may be 40 key days. If you miss those days you miss the returns of the whole market. You have a 1 per cent chance to get it right and you don’t do something for a 1 per cent chance.

‘Fortune Strategy and this book use the same core investment strategy. If you apply that, the odds are in your favour. The only thing you have to manage is time.’

Ipac advocates four key principles in investments. These are to invest in quality companies; to diversify; to avoid overpaying for assets; and to give your portfolio time.

But there is yet one more mistake – as Mr Abey sees it – that may be hard for Singaporeans to swallow. That is the tendency to over-invest in property. ‘Investing in residential property other than your family home is likely to result in higher risk and lower returns than investing in quality shares,’ he writes.

He argues that the risks of a property investment tend to be understated, and the returns overstated because of flaws in measurement. Assessment of values, for one, is infrequent and informal.

‘Property investors never see red ink on a statement unless it is on the day of sale. And most property investors never formally evaluate the performance of their investments at all.’

Mr Abey lives in Australia, where cities like Melbourne and Sydney, and more recently Perth saw the strongest home prices until recently. He himself does not ‘invest one cent in residential property outside of my family home’.

Perhaps the key chapter in the book is the one that presents a framework for understanding the role of money, which he calls the ‘bridge of well being’. The process of developing and implementing this framework is the essence of lifestyle financial planning itself.

There are three steps to this. One is to understand your goals. Two is to apply your resources towards those goals.

That includes saving and investing. The third is to have a simple investment strategy.

‘You need to develop a financial plan for yourself – not for your money … The aim … is to help you experience the good life you want to live, knowing sufficient money is there to support you.’

 

Source: Business Times 12 Sept 07

US home sales not likely to recover next year

Moody’s says slump may last till 2009 as buyers struggle to get mortgages

(NEW YORK) The US housing slump will probably last until 2009 and home sales will take a ’substantial hit’ in the next several months as borrowers struggle to get mortgages, Moody’s Investors Service said.

‘The downturn is more severe and more protracted than we had expected,’ Joseph Snider, a credit officer at Moody’s, said. Home sales will be hurt by the lack of sub-prime and Alt-A mortgage lending and the difficulty borrowers with good credit are having obtaining mortgages, Moody’s said on Monday.

A glut of new and existing homes for sale is prompting potential buyers to wait for prices to fall before purchasing.

The Moody’s forecast contrasts with the National Association of Home Builders, which expects housing to begin rebounding in mid-to-late 2008. It also came as Federal Reserve Bank of San Francisco president Janet Yellen said the economy is under ‘downward pressure’ from turmoil in credit and housing markets.

The worst housing market in 16 years has sent a Standard & Poor’s measure of 16 US homebuilders down 49 per cent this year.

Moody’s said on Monday it has taken 38 negative ratings actions on the 22 US homebuilders it rates over the past year and more downgrades are possible. Builders may also begin violating credit agreements and banks may tighten restrictions placed on companies.

‘Tighter lending and credit standards, diminished consumer home-buying confidence, rising cancellation rates, and falling home prices – especially in the most reliable strong real estate markets prior to 2006 – have exacerbated the industry’s woes and further deepened our year-long negative view,’ the report said.

A recovery for housing could be hastened should the Federal Reserve take ‘frequent and concerted action’, the report said. Moody’s said it doesn’t expect that kind of action to occur unless the economy heads into a recession.

Mr Snider said that Moody’s had estimated there might be a second-half housing recovery in 2008. That forecast has now ‘been pushed back some’, he said.

Meanwhile, Fannie Mae and Freddie Mac, the biggest sources of money for US home loans, adopted rules intended to discourage the funding of high-risk sub-prime mortgages, the Office of Federal Housing Enterprise Oversight said.

The rules require Fannie Mae and Freddie Mac to buy home loans from originators that ‘help prevent abuses’ in mortgage lending, Ofheo said on Monday.

The two companies can only purchase home loans after verification of the borrowers’ income and ability to adjust to higher interest rates, according to the guidelines.

 

Source: Bloomberg (Business Times 12 Sept 07)

MONEY MATTERS – Time to get domestic

Recession in the US used to be the kiss of death for emerging economies, but that may no longer be the case

By MICHAEL PREISS

THERE was something inevitable about the worst US job reports in four years. They suggest that the American economy has now ‘officially’ slipped into recession and will ensure that the Bernanke Fed cuts the overnight borrowing rate at the next three open market committee meetings, starting Sept 18. Net-net, a 4 per cent Fed Funds rate is the last antidote to the liquidity squeeze and credit shock that has delivered a deflationary blow to Wall Street and the international banking system. Global stock markets are on edge, amid fear that the correction in equities could morph into something far nastier.

The risk is that the US stock market could re-test its August lows, because even a Fed rate cut cannot magically end the distress of millions of bankrupt homeowners and the financial bomb that has hit the mortgage-backed securities and credit derivatives markets. Main Street is going down and Ben Bernanke and his merry men at the Fed must act fast or risk economic disaster.

Fear cannot be captured in any economic model but it is the one human emotion more powerful than greed during a psychological U-turn.

Not even the most soothing words from Mr Bernanke can change the fact that as long as US house prices continue to fall, the leverage-embedded mortgage-backed securities and collateralised debt obligation markets – and investors in these markets – are in deep trouble.

The meltdown in sub-prime mortgages is not the real malaise affecting the capital markets. The real time bomb is the coming end of the structured finance business, in which financial innovation has often been nothing more than collusion between investment banks and ratings agencies to disguise highly risky mortgage and corporate debt as AAA securities.

When even the Bush White House is compelled to fulminate against Wall Street, a Congressional witch-hunt and more restrictive regulatory protocols are inevitable.

The Day After

The macro-economic impact of ‘The Day After’ on Wall Street will be a deflationary shock as broker-dealers and institutional investors de-leverage their exposure to mortgage-backed securities and structured finance. This means that new issues of corporate bonds and leveraged buyout loans will plummet because investment banks can no longer underwrite or syndicate credit risk, even though it has been re-priced higher since August.

Asset-backed commercial paper liquidity lines have come back to haunt the world’s largest banks, which must now necessarily cut bank credit growth. The markets are witnessing the dark side of securitisation as international banks are caught with untold billions of off-balance-sheet exposure. This is the real reason that central banks are desperate to pump huge amounts of liquidity into money markets frozen with fear.

Emerging markets have not escaped unscathed from the trauma in the world financial markets since August. Apart from China’s Shanghai A shares, market indices as diverse as Brazil’s Bovespa, South Korea’s Kospi, India’s Sensex and Russia’s RTS plunged 10-20 per cent in just four weeks as the Japanese yen carry trade unwound with a vengeance in the foreign exchange market and triggered a global scramble to sell risk.

This meant that billions of dollars fled emerging market equities, that spreads on emerging market sovereign debt widened above 200 basis points on US Treasuries and that the Chicago Volatility Index doubled in a month.

But what will be the end-result of the US credit bust on emerging markets?

In my view it will be a strong de-coupling from the now outdated and wrong assumption that the US dollar and US rates are the global benchmark and the so-called risk-free rate.

Emerging market spreads recently have been the narrowest in history. Does this mean that all emerging markets are over-valued? Or that the underlying assumption that US-dollar rates are the ‘risk-free-rate’ needs to be rethought?

Do the lessons of 1998 have any relevance in the months ahead? I believe so.

As US economic growth decelerates, the Fed will do its best to reduce the real cost of borrowing to zero – a prerequisite to avoid recession and re-liquify the banking system. This means the Fed Funds rate can well fall below 4 per cent some time next summer.

While this will most probably help the US equity market, it will mean a much lower value for the US dollar in the foreign exchange markets.

Ordinarily and in the past, a US recession is or was the kiss of death for emerging markets.

But this may not be the case now, particularly if the Fed, at the expense of a much weaker US dollar, cuts rates aggressively to pre-empt recession and global GDP growth, led by China, India, Brazil and Russia, anchors domestic demand and export growth in emerging markets.

As the US Treasury bond yield falls to 4.25 per cent, emerging market equities will be the biggest beneficiaries, as more and more global investors realise that the real victim of the sub-prime mess is the US dollar.

However, I recommend buying domestic demand, not export, plays in emerging markets in order to insulate a portfolio from the very real risk of a US slowdown.

Russian banks and telecom shares such as Sberbank, Vimplecom, MTS and Comstar provide exposure to one of the world’s highest-growth consumer stories in a petro-dollar state with 160 million citizens and US$400 billion of reserves.

The credit crunch may actually prove beneficial to the Russian stock market because it will force the postponement of many London floats, which cannot take place amid a mood of risk aversion.

The Singapore market was also victim of the stockmarket sell-off on Wall Street and the Asian bourses. In fact, Singapore property shares fell far more than even the Straits Times Index, as much as 20-30 per cent in some cases.

The Singapore Reit sector’s cost of capital has risen, but its growth prospects are tied to South-east Asia’s most compelling asset reflation story.

After all, the forward yield on the sector is now 5.2 per cent – a compelling value metric for long-term exposure. It is imperative to seek Reits that offer long lease contracts, high-quality assets and acquisition strategies, proven business models and attractive discounts to net asset value.

It is ironic that the largest, most liquid Singapore Reits have been hit the hardest, proving once again that during moments of panic, emerging market managers do not sell what they must, they sell what they can.

So CapitaCommercial Trust, CapitaMall Trust, Ascendas and Mapletree are all down 20 per cent from their August highs. The spread between the Singapore Reit forward dividend yield and the island’s bellwether 10-year government bond rate is now the highest since at least May 2006.

Singapore Reit shares will be the natural beneficiaries of central bank easing in the US and Europe, somewhat akin to Nasdaq stocks after the Greenspan Fed bailed out Long Term Capital Management in 1998.

Asian property in local currency could be the next big thing in emerging markets, especially as the US dollar takes a tumble when the Fed cuts rates aggressively.

Michael Preiss is a chartered wealth manager and can be reached at Michael@michaelpreiss.net

Source: Business Times 12 Sept 07

American jobs outlook steady for Q4: survey

(NEW YORK) Weak US housing and trouble in the credit markets are, for now, having limited impact on job plans, according to a survey released yesterday.

Employers remain confident about hiring for the fourth quarter, Manpower Inc said. Its poll of 14,000 employers found the net employment outlook – the difference between those adding jobs and those cutting them – was unchanged for the fourth quarter from the third.

The seasonally adjusted level of 18 compares with a reading of 20 a year ago, Manpower reported.

The Manpower report comes after the government last week reported a surprise drop in US non-farm payrolls in August, which raised fears that the US economy was shifting to a much lower pace of growth or could tip into recession.

Most industries reported steady demand for workers, but employers in mining, transportation and utilities have lower confidence about hiring compared to the previous quarter.

When compared with a year ago, hiring expectations are weaker in six of the ten industry sectors surveyed by Manpower.

Expectations are unchanged in three sectors and higher in one: education and public administration.

A slowdown in the US housing market is being felt among finance companies, especially in the northeast, and in construction, but companies without direct exposure to housing remain reasonably confident about the health of their business, Manpower CEO Jeff Joerres said.

‘They say, ‘I’m going to be in the marketplace but I’m going to hire very judiciously. I will only add what I need to add’,’ Mr Joerres said. ‘That means there’s not as much to drop out if there are some more difficult times.’

Job prospects are again strongest in the west and weakest in the north-east, Manpower said, where there is particular softness in transportation, utilities, education and mining.

A separate, international poll of 52,000 employers, also conducted by Manpower, found positive hiring prospects in all 27 countries and territories it surveyed.

Employers in Australia, Germany, Japan and India, among others, reported their best optimism in the survey’s history.

By contrast, those in Italy, France, the Netherlands and Belgium are less optimistic.

Job projections in China were lower both from the previous quarter and from a year ago, in part reflecting concern ahead of new labour laws coming into effect at the start of 2008.

‘They’ve been growing so quickly for so long that they’re going to be cautious,’ Mr Joerres said.

 

Source: Reuters (Business Times 12 Sept 07)

Shanghai stocks dive as inflation soars

Interest rate fears fuel 4.5% plunge in Shanghai market

(BEIJING) Soaring food prices propelled China’s annual consumer price inflation to 6.5 per cent in August, the fastest pace in nearly 11 years, cementing expectations the central bank will defy the global trend and keep raising interest rates.

The inflation rate published yesterday, up from 5.6 per cent in July, easily surpassed economists’ forecasts of 5.9 per cent. It was the highest reading since December 1996.

Shanghai stocks plunged 4.5 per cent, the biggest daily drop in two months, as investors fretted that higher borrowing costs could help bring the market’s dizzying rally to a halt.

‘Going forward we believe there are non-trivial risks that inflation may continue to edge up,’ economists at Goldman Sachs said in a note to clients. ‘We expect the central bank to respond to higher inflationary pressures with decisive tightening measures, including two interest rate hikes to the benchmark lending and deposit rates by the end of this year.’

China also reported a trade surplus for August of US$24.97 billion. It was the second-biggest on record but slightly lower than forecast as the ending of some tax rebates dented exports.

The ruling Communist Party, aware that inflation has touched off unrest in China down the ages, has voiced increasing concern about the speed of price rises.

A senior party researcher warned on Monday that inflation becomes difficult to control once it exceeds 5 per cent, while a local paper said Beijing had told schools and colleges in the capital not to raise canteen food prices as inflation climbs.

The National Bureau of Statistics said inflation was driven by an 18.2 per cent leap in the cost of food, which accounts for a third of the consumer price basket.

Meat prices rose 49 per cent in August from a year earlier, reflecting a shortage of pork, China’s staple meat.

China’s pig population has fallen 10 per cent due to blue-ear disease and reduced incentives to rear hogs, including fast-rising foodgrain costs and low prices last year.

China, the world’s biggest producer and consumer of pork, could quadruple its imports of the meat this year to 100,000 tonnes to ease the shortage, industry sources said yesterday.

To keep a lid on inflation and prevent the world’s fourth-largest economy from overheating, the central bank has raised interest rates four times this year and ordered banks on seven occasions to tie up more of their deposits in reserve.

As for the market plunge, analysts said that after more than doubling this year to last Thursday’s all-time high, the benchmark stock index might finally be starting a substantial pullback, even though they believe a full-fledged bear market remains very unlikely.

‘All the government policies will have a cumulative impact on the market – eventually, there will be a last straw on the camel’s back,’ said Liu Lifeng, fund manager at BOCI Securities.

Many traders think the market will in coming days slip to psychological support around 5,000 points.

A drop to technical support in the 4,700-4,800 area, where the index’s mid-August peak roughly coincides with the 38.2 per cent retracement of its rally since early July, also looks quite possible.

 

Source: Reuters (Business Times 12 Sept 07)

Will China’s central bank hike rates again?

From a macroeconomic point of view, it might not be in a rush for an increase this month

THE People’s Bank of China (PBOC), China’s central bank, issued 151 billion yuan (S$30.6 billion) of directional bills to selected commercial banks last week. Unlike the ordinary central bank bills distributed in the open market, PBOC made it compulsory for the commercial banks to purchase its tranche of directional bills.

This is the fifth time the central bank has wielded such a tool to restrain domestic banks from expanding credit too fast. While the term remains the same, the size of the current bill issuance is bigger than the previous four batches of 101 billion yuan.

Moreover, while the yields of the previous four batches of directional bills were only two to six basis points lower than normal central bank bills, the spread between the yield of the new batch and that of the ordinary ones widened to 10 basis points.

The issuance of directional bills came only one day after PBOC announced an increase in bank reserve ratio of 0.5 percentage points to 12.5 per cent, effective from Sept 25. It is the seventh time the central bank has increased the bank reserve ratio this year.

Contrary to general expectation, China’s economy didn’t slow in 2007. Instead, China’s economy has been accelerating despite a series of macro economic control measures.

In the first half of 2007, China’s GDP grew by 11.5 per cent, 0.6 percentage points higher than the same period in 2006. In particular, the investment growth remains at an uncomfortably high level.

In the first seven months, fixed asset investment in urban China grew by 26.6 per cent, which is partly driven by excess liquidity.

According to the central bank, M2, the broad measure of money supply, went up 18.48 per cent by the end of July 2007, over the same period last year. The growth rate is 1.42 percentage points higher than that of the end of June, indicating acceleration in money supply.

Currently, directional bills, bank reserve ratio requirements and interest rates are the three major instruments the PBOC uses to adjust liquidity in China’s financial market.

So far, PBOC has increased the interest rate four times within this year. Therefore the question we are left with is whether PBOC will increase the interest rate again this month after last week’s tightening move.

Usually, the decision of an interest rate hike is made at a weekend after major economic statistics, such as the consumer price index (CPI) and fixed asset investment in urban areas, are released by the National Statistics Bureau (NSB). According to the data release schedule, the next possible interest rate hike may be announced on Sept 14.

It does seem that the forthcoming August figure would trigger a new interest hike. It is widely expected August CPI will go beyond 6 per cent, provided food prices, the major drive for a high CPI rate, continue to pick up. The July figure hit a 33-month high to reach 5.6 per cent.

However, from a macroeconomic point of view, we reckon that even if a high CPI rate comes together with a high fixed asset investment figure, PBOC might not be in a rush for a new interest rate hike this month.

First of all, the high CPI rate might not be a bad thing in China. In fact, the CPI figure in July was less than one per cent, if food prices, which account for about one-third in the price basket, is excluded.

The food price surge will eventually benefit the farmers and help the country to narrow the widening income gap between the urban population and the rural one.

In the first half of 2007, net income of farmers grew by 13.3 per cent, which is a 20-year high.

Additionally, it is a common practice that Chinese banks extend loans much faster in the first half of one year.

Thus PBOC is under less pressure to control bank credit expansion in the second half.

Therefore, the current stronger-than-usual directional bill measure, together with a new bank reserve ratio hike, might allow PBOC more time to see the result of its actions.

Tiger Tong is an analyst with China Knowledge, a premier provider of trade and investment information on China

 

Source: Business Times 12 Sept 07

Plunge in August auction sales partly due to US sub-prime woes

Total value hits $11m, one-fifth of previous month’s showing: Colliers

SALES of properties on auction here plummeted last month, in one of the first signs that the global credit crunch may be taking a toll on Singapore’s property market.

Only $10.79 million of properties were sold under the hammer in the month, less than one-fifth of what was fetched in each of June and July, said property firm Colliers International, one of the biggest auctioneers here.

Since March, the value of properties sold via auction each month has ranged from $33 million to $108 million.

But this plunged last month, said Colliers, which released a report on auction sales yesterday.

In previous years, August has traditionally been a slow month for property sales due to the Hungry Ghost Festival.

But superstitious buyers were not the reason auction sales turned in an exceptionally poor showing in this year’s hungry ghost month, which stretched from Aug 13 to Monday.

Colliers said the nosedive in sales was mainly due to the recent stock market volatility caused by United States sub-prime mortgage worries, new government policies, and higher asking prices by sellers.

‘Given the good property market performance, many sellers have raised their expectations and upped their asking prices, especially for properties with en bloc potential,’ said Ms Grace Ng, Colliers’ auctioneer and deputy managing director.

She added that these properties have also become less appealing, thanks to the newly announced rules governing collective sales, which will make it more difficult for developments to sell en bloc.

In addition, the ’stock market turmoil amid the US sub-prime woes’ has also contributed to the ’slowdown in the market, as buyers take a cautious stand’, Ms Ng said.

Only 10 properties were sold via auction in this year’s hungry ghost month, less than one-tenth of the 131 that were put up for sale in the period.

The properties that were sold fetched $9.56 million in all – a tiny fraction of the $133.86 million achieved in last year’s double hungry ghost month and ‘one of the lowest seen in the past 10 years’, Colliers added.

Although the hungry ghost month typically sees fewer property sales due to superstitious buyers and sellers, the firm said this is unlikely to be the reason for the plunge in auction sales of property.

Indeed, the number of properties put up for auction by their owners in the period surged to 88, the highest level in at least a decade.

On the other hand, the number of repossessed properties – traditionally the main source of supply for auction sales – fell to 43, down from 239 last year and the lowest level since 1998. This was largely due to the buoyant economy and climbing property prices, said Colliers.

All this shows that auction sales in the hungry ghost month were being moved more by market conditions than superstitious beliefs, the firm added.

But Ms Ng was quick to point out that the firm is still receiving plenty of inquiries about auction properties from potential buyers.

‘The inquiries are still there, but people are thinking twice before jumping in,’ she said. ‘They may be taking a step back and reassessing the prices.’

Colliers also noted that while auction sales may have plunged in the hungry ghost month, other segments of the property market appeared to still be going strong.

For instance, the total number of homes sold in the period is ’still at a very healthy level’, although it has been falling since May, the firm said.

 12sept07_st_plungeinaugauctionsalespartlydue2ussubprimewoes2.pdf 

 

Source: The Straits Times 12 Sept 07

WARRANT WATCH – Investors load up on property contracts

THE turmoil which has engulfed financial markets globally has hardly dented investor enthusiasm in Singapore’s red-hot property market.

The swift recovery of property giants such as City Developments (CDL) and CapitaLand after a region-wide selloff two weeks ago suggests that the Singapore equities market has decoupled itself from the volatility on Wall Street.

Yesterday, covered warrants on property developers were among the most actively traded contracts on the Singapore Exchange.

These included a call warrant issued by Deutsche Bank on CapitaLand which closed 0.5 cent lower at 21.5 cents on a volume of 8.15 million units, and a contract issued by Macquarie Bank on CDL which ended one cent down at 14 cents, with 6.67 million units traded.

Interest in these warrants was spurred by the $1.69 billion winning bid by CDL and partners for a plum commercial site at the old Beach Road military camp.

‘This hotly-contested bid is a strong testimony of the keen interest in the property market by foreign developers and the big boys here,’ said a dealer.

Deutsche Bank vice-president Sandra Lee expects warrants on property counters to remain popular with investors. These include a Deutsche Bank call warrant on CapitaLand which requires its holder to use five warrants after paying a strike price of $7.80 for conversion into one share.

 

Source: The Straits Times 12 Sept 07

Third site for condo-like public flats in Ang Mo Kio

A CHOICE site close to amenities in Ang Mo Kio has been earmarked for the third public housing project to be designed, built and sold by private developers.

The site, which analysts estimate can fit about 550 flats, and blocks that rise up to about 36 storeys, will be launched for tender by the HDB today. The tender closes on Nov 27.

Already, property analysts expect strong demand from developers, and later, by home-hunters. This comes after red-hot demand when the first public-private project went on sale in Tampines last year.

The 1.7ha plot in Ang Mo Kio Street 52 is a stone’s throw from Ang Mo Kio town centre and the recentlyopened commercial and transport complex Ang Mo Kio Hub.

Some of the flats will appeal to homebuyers on lower budgets. The developer that snags the Ang Mo Kio site will have to reserve at least 30 per cent of the project for four-room or smaller units.

Property analysts say the site is set to be a winner. It is near the leafy Ang Mo Kio Town Garden East, as well as Ang Mo Kio MRT station and a host of shops in the mature town.

Property agency Propnex’s chief executive, Mr Mohamed Ismail said: ‘This is a sure-sell location.’

Dennis Wee Properties director Chris Koh expects the land to fetch $125 million, while Savills Singapore’s director of marketing and business development Ku Swee Yong predicted a range of $100 million to $125 million.

Mr Mohamed expects the flats there to go for between $350,000 and $400,000 each.

The land parcel has a 103-year lease, and the developer will have to complete the project within four years of buying the land. The apartments will come with elderly-friendly features, as seen in new HDB flats now.

Under the hybrid scheme launched two years ago, developers design, build, price and sell flats built according to the broad rules of public housing. This means that common spaces have to be easy to maintain, that buyers have to meet ethnic quotas, and that only family units can buy the flats, for example.

Interest in these flats has been keen so far because they are located in mature estates and come with fittings more commonly found in private housing, such as bay windows.

The first batch of 616 Tampines units, being developed by Sim Lian Land, received close to 6,000 applications last year. Most were five-room units in blocks up to 17 storeys high, priced at between $308,000 and $450,000.

The second batch of about 700 flats in Boon Keng Road will be launched for sale later this year by a consortium led by Hoi Hup Realty. It will comprise three 40-storey blocks.

12sept07_st_3rdsite4condolikepublicflatsinamk2.pdf 

 

Source: The Straits Times 12 Sept 07

Plenty of upside left in mid-tier property market: Kwek Leng Beng

DESPITE woes in the United States’ housing market, there is still plenty of zing in Singapore’s red-hot property market.

Banks are still lending a lot of cash and mid-tier homes are still on offer at prices below 1996’s peak, says Mr Kwek Leng Beng, executive chairman of leading developers City Developments and Hong Leong Group.

‘I believe that there is still a lot of upside. At the mid-tier, prices are still less than 90 per cent of the peak in 1996,’ he told delegates yesterday at the Forbes Global CEO Conference.

His bullish view was echoed by his counterparts from other parts of Asia, including China, India and the Middle East.

They agreed that real estate remains hot property in their countries even as problems in the US have thrown global financial markets into a tizzy.

‘The (Shanghai) market is very strong because the inherent demand is just tremendous,’ said Hong Kong developer Shui On Group chief executive (CEO) Vincent Lo.

Residences next to the hip Xintiandi area are commanding prices of up to US$10,000 (S$15,236) per sq m, he said, adding that the waiting list for office space in the city stretches to 2010.

In the United Arab Emirates (UAE), property development is growing at unprecedented rates, said Dubai 9 Group managing director Hayan Merchant, noting that 26.5 per cent out of the world’s 130,000 cranes are in the UAE.

About 30 million sq ft of office space will be added in Dubai next year, he said, while another 42 million sq ft – equivalent to all the office space in downtown San Francisco – will come online the following year.

Singapore’s boom should continue even though psychological fears over the ongoing global credit crunch may take a little of the fizz out, said Mr Kwek. He said that lenders in Singapore are a little more cautious but there is still plenty of liquidity.

He added that historic prices over the past 10 years imply that the ‘right’ selling price for top-end properties should be about $3,600 per sq ft on average.

‘We are doing about $4,000. It’s about 10 per cent up, which is not alarming.’

The Government’s efforts to make Singapore a ‘global city’ that attracts foreigners to live here will help sustain the property bull run, he said.

He said that last weekend, he had met a group of foreigners, some of whom were developers, visiting Singapore for the first time. After four or five days, they started asking about buying high-end condominiums and office blocks.

‘All the real estate sectors – industrial, retail, commercial and residential – have kicked off. And this has to do with growing interest in Singapore as a global city.’

 

Source: The Straits Times 12 Sept 07

Housing turmoil ‘threatens US economy’

Fed officials say there is a risk of broader downturn; comments set stage for rate cut

WASHINGTON – TWO senior Federal Reserve officials said on Monday that the turmoil in housing and mortgage lending has begun to threaten the overall US economy.

Their statements set the stage for a likely cut in the Fed’s benchmark interest rate next week.

Fed governor Frederic Mishkin told a group of investors on Monday that the risk of a broader downturn ‘cannot, in my view, be ruled out’.

Mr Mishkin said inflation pressures had become less of a problem – a judgment that, if embraced by other Fed officials, would remove a major argument against lowering interest rates.

Fed Bank of San Francisco president Janet Yellen said a housing downturn and tighter credit were likely to cause ’significant downward pressure’ on consumer spending and, thus, on economic growth.

Even if investors overcome some of their fears, mortgage rates are likely to remain higher on a long-term basis and could continue to push housing prices down, she said.

‘Should the decline in house prices occur in the context of rising unemployment, the risks could be significant,’ she added.

Her comments highlighted a point recently stressed by Fed chief Ben Bernanke, that officials do not plan to wait for irrefutable statistical evidence of an economic downturn.

Rather, they are ready to act on warning signs, including anecdotal business reports, that the probabilities of a downturn are too high to ignore.

In response to the comments, Fed watchers said it seems likely that an interest rate cut will take place.

However, they said it is not clear if Mr Bernanke and his colleagues are ready to cut as much as investors expect, and many economists say they must, to keep the United States out of a recession.

The contrasting remarks made by two other Fed officials indicated that there may be some divide among the policymakers themselves as to what to do next week.

Dallas Fed president Richard Fisher said on Monday that the bleak jobs report was merely a ‘discordant note’, and that he was still unpersuaded about a broader downturn.

Philadelphia Fed president Charles Plosser said earlier last Saturday that policymakers should not put too much stress on the loss of jobs last month, and that he had not made up his mind yet on a rate cut.

The scope of remarks may reflect a debate inside the US central bank over whether to lower the benchmark rate on Tuesday by a quarter-percentage point, or a half-point, as some investors expect.

Meanwhile, market conditions have turned investors jittery.

On Monday, European Central Bank president Jean-Claude Trichet warned of ‘hectic behaviour’ in the global economy and urged central bankers to keep a close eye on the US for signs of an economic slowdown.

‘This is no time for complacency. The current situation calls for close observation and monitoring,’ said Mr Trichet at a gathering in Basel, Switzerland, of the world’s top central bankers, including US Federal Reserve chairman Ben Bernanke and the Bank of Japan governor Toshihiko Fukui.

A survey by the US National Association for Business Economics, meanwhile, lists a recession as the greatest risk to the US economy over the next year, outpacing inflation as the biggest concern by a two-to-one margin.

The economists forecast a half-point cut in the federal funds rate by the end of the first quarter of 2008, up from May’s forecast of a quarter-point cut.

Source: NEW YORK TIMES, REUTERS, BLOOMBERG NEWS (The Straits Times 12 Sept 07)

Malaysia’s private sector will drive development projects: Abdullah

KL will not build fast train track to S’pore, neither will it stop firms from doing so

MALAYSIA will rely on the private sector to drive its developmental projects from now on, departing from its previous practice of putting government agencies and civil servants in charge, its Prime Minister said yesterday.

Prime Minister Abdullah Badawi told 400 captains of industry this when fielding a slew of questions from American publishing tycoon Steve Forbes, after he delivered the keynote address at the Forbes Global CEO Conference gala dinner at the One Degree 15 Marina Club in Sentosa Cove last night.

As an example of what he meant, he said his government will not build a bullet train track between Singapore and Kuala Lumpur, but will not stop the private sector from taking on such a project.

‘If you are going to spend your money on this, I will allow you to do it,’ he said. ‘You spend the money, you build the train, you decide on the fares.

‘We will not maintain it, because we are not in the business of running a train. We don’t want the train.’

Datuk Seri Abdullah added that, in any case, the government wanted to spend what money it did have on improving the quality of education in Malaysian schools, so that the country had better human capital ‘to go up the value chain’.

The Singapore-Kuala Lumpur fast train idea was mooted by Malaysian construction conglomerate YTL Corporation twice – in 1998 and again last year. But, for various reasons, YTL’s proposal ran into delays while awaiting the official go-ahead.

In his remarks yesterday, Datuk Seri Abdullah also sounded a word of warning to the private sector: If you fail in your projects, don’t expect the government to come running to your rescue.

‘If you have built this, and it doesn’t work…I am not bailing you out,’ he said. ‘You may need the money, but we are not bailing you out.’

He did not cite examples but in the past month, there was much talk that the government’s soft loan to the private-driven Port Klang Free Zone project was in effect a bailout. This was after the project’s costs ballooned from RM1.1 billion to RM4.63 billion (S$477 million to S$2.01 billion).

There were two caveats to Malaysia’s new push for private-led ventures for big projects.

First, the government will set aside money for a facilitation fund. Called the Private Financial Initiative (PFI), it could be used to acquire land, build roads and help link utilities to the projects, he said.

Second, if foreign firms needed workers, the Malaysian government will train them at its own cost.

When Mr Forbes asked Datuk Seri Abdullah about apparently prevalent cronyism in Malaysia, he replied: ‘I don’t understand this word cronyism now. Everyone has a chance.’

Datuk Seri Abdullah reiterated that ‘everyone has a chance’ when Mr Forbes asked him later whether Chinese and Indians had a place in Malaysia’s future.

Referring to Malaysia’s longstanding affirmative action policies to help the Malays, Datuk Seri Abdullah stressed: ‘All these policies that you say favour the Malays are government policies. They are a product of a decision taken by a multiracial Cabinet.

‘Nobody said ‘I’m out’. No one disagreed or said ‘I’m seeking an exception’. None.’

UP TO YOU

‘If you are going to spend your money on this, I will allow you to do it. You spend the money, you build the train, you decide on the fares.’ – DATUK SERI ABDULLAH, saying he will not stop the private sector from building a bullet train track between Singapore and Kuala Lumpur

ON YOUR OWN

‘If you have built this, and it doesn’t work…I am not bailing you out. You may need the money, but we are not bailing you out.’ – DATUK SERI ABDULLAH, sounding a word of caution

Source: The Straits Times 12 Sept 07